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YUHAN ANNUAL REPORT

2017-2018

P R O G R E S S & I N T E G R I T Y

Sound Corporate Governance

Yuhan’s largest shareholders consist of a non-profit foun-

dation and organization (the Yuhan Foundation and Yuhan

School) as well as foreign investors. The company’s own-

ership structure resembles more a non-profit organization

than a private company. Under the belief that a company

belongs to the society it serves, with its leaders serving as

mere stewards entrusted with its care, Dr. New appointed

top executives through open recruitments. This tradition is

still in place today and represents Yuhan’s unique system

that enables independent and responsible management.

03

VALUABLE ASSETS

YUHAN’S STORIES

Yuhan Corporation has five invaluable assets that have remained in place since its foundation: the founder, Dr. Ilhan New, who was a pioneer in social contribution; an established system of re-turning corporate profit to society in line with the founding phi-losophy; an advanced corporate governance system that allows for accountable management independent from the owners; an open corporate culture that ensures fair opportunities for all to reach top management; and a company where every single mem-ber—from top to bottom—shares a sense of ownership. These five things not only differentiate Yuhan Corporation from all oth-er Korean companies, but constitute our competitiveness, which has seen us rise to where we stand today.

Dr. Ilhan New:A Businessman Ahead of His Time

In recognition of practices and achievements over the

course of his lifetime, Dr. Ilhan New continues to be greatly

respected by everyone at Yuhan Corporation. A business-

man ahead of his time in his commitment to society, he not

only gave back everything he owned to society, but also set

an admirable example for all Koreans as an innovative entre-

preneur, social worker, independent activist, and educator.

01

Your Dreams Come True Here

Although most business workers dream of one day becom-

ing a CEO, everybody knows that few people ever achieve

this goal. However, this is made possible at Yuhan. Ever

since 1969, when Dr. New appointed someone who had no

blood relations to him as his successor—president and CEO

of the company—Yuhan has carried on this meritocracy of

CEO promotion from within for decades. In fact, for almost

50 years every CEO at Yuhan Corporation has been hired

internally from among those who started their careers as

entry-level employees and subsequently built a career within

the company.

04

Virtuous Circle of Corporate Profits

A company’s pursuit of profits should drive the development

of society and contribute to its prosperity, not individual

wealth and prosperity. This was the maxim of Dr. Ilhan New

during his lifetime and the founding philosophy of Yuhan

Corporation in 1926. It is also what he devoted his life to

translating into action. Upon his death, he bequeathed his

entire wealth to social initiatives and established a system

of contributing to society through corporate activities. This

unprecedented means of returning profits, along with his

sense of altruism, is still Yuhan’s most invaluable asset.

02

Employee and ManagementBound Together by Ownership

Yuhan Corporation has remained free of labor disputes

since its foundation in 1926. Guided by Dr. New’s notion

that “All members of a company are part of a greater com-

munity that is bound together by a common goal,” every-

one at Yuhan Corporation is part owner of the company.

While Yuhan, unlike any other Korean company, has no

labor relations issues to deal with, it is bound together by

strong ownership.

05

PROGRESS & INTEGRITY

The circular logo of our two core value words—progress and integrity—surround the company’s sym-

bol, a green willow tree, and epitomize the founding philosophy of Dr. Ilhan New (1895-1971).

Over the course of the past 92 years, the notions of progress and integrity have always remained at the

heart of all our business activities, which put fidelity and honesty before everything else. Determined

to put into practice our principled management in a transparent manner, we have continuously bet-

tered ourselves through an enterprising spirit and constant innovation drives.

Our pioneering spirit to venture down new paths more passionately than anyone else has given us the

ability to become Korea’s top pharmaceutical company. This has propelled us to become one of the

most admired companies in the country.

Today, on the cusp of our 100th anniversary, we are busy creating innovative value and overcoming

challenges on our way to unveiling a better future based on our core values and under the slogan

“Great Yuhan, Global Yuhan.” Through the development of innovative drugs and new businesses that

will generate even greater value, our goal is to grow beyond being merely a respected company as we

transform ourselves into a truly great company that contributes to the health of people around the

world by fulfilling our social responsibilities and giving back to society.

YUHAN ANNUAL REPORT 2017-2018 — Message From The CEO2

YUHAN ANNUAL REPORT 2017-2018 CONTENTS

Yuhan’s Stories

Message from the CEO

Securing Sustainable Growth through Improving Profitability

Developing New Value by Strengthening R&D

Creating New Business Opportunities for Further Growth

Corporate Overview

2017 Financial Highlights

2017 News Highlights

Board of Directors

Corporate Governance

Ethical Management

Pharmaceuticals Business

Overseas Business

Healthcare & Consumer Products Business

Research & Development

Production

Yuhan Product Portfolio

Yuhan’s CSR System

Corporate Social Responsibility

Volunteerism

Human Resources Development

Health, Safety & Environment

Independent Auditors’ Report

Consolidated Statements of Financial Positions

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows


Separate Statements of Financial Positions

Separate Statements of Comprehensive Income

Separate Statements of Changes in Equity

Separate Statements of Cash Flows

Statements of Earned Surplus

Best Brands

Affiliates

History

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STRATEGIC PROGRESS Our Business Performance

Progress & Integrity

SINCERE INTEGRITY Our Responsibilities

PROGRESS & INTEGRITY Financial Statement

































PROGRESS & INTEGRITY THROUGH

NEW CHALLENGE & NEW VALUE CREATION

Message From The CEO — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Message From The CEO9

Letter to the Shareholders

Message from the CEO

Respected Stakeholders,

It is with great pleasure that we report to you on our

past year’s accomplishments and this year’s business

plans.

In 2017, Yuhan Corporation achieved an 11 percent

year-on-year growth in sales, which reached KRW 1.46

billion thanks to our dedicated, hardworking employ-

ees in the face of the challenging business environ-

ment. In fact, the annual growth rate of Yuhan’s sales

has remained at an average of 13 percent over the last

three-year term, proof of our dominant leadership

in the domestic pharmaceuticals market. Our invest-

ments in R&D have increased by 20 percent over the

previous year and Yuhan’s investments in new busi-

nesses and diversification of megabrand product line-

ups at pharmacies likewise experienced a substantial

expansion in 2017.

Looking at the performance results from the business

sector, the Pharmaceuticals Operation achieved a high

growth rate exceeding 12 percent. As a result, sales

from this operation alone surpassed KRW 1 trillion for

the first time in the company’s history. Led by Viread,

Trajenta, Twynsta and Atorva, the number of anchor

brands selling over KRW 10 billion increased from 21

of the previous year to 23 in 2017. At the same time,

our own brand products such as Rosuvamibe, Duow-

ell, Beecom-C and Megatrue continued steady sales

growth.

The Healthcare & Consumer Products Operation fo-

cused on increasing its market share of key brands, in-

cluding Yuhanrox and toothbrushes/pastes. The newly

launched Happy Home and Yuhan Gen, household in-

secticide and bleach, respectively, have both become

hot sellers and positioned themselves as mega-brands

with sales of KRW 10 billion or higher, achieving a re-

markable 14 percent growth in the competitive mar-

ket.

Building on the alliances with our international part-

ners, our Overseas Operation has expanded by five

percent in sales due to the increased exports for hep-

atitis C and AIDS treatment medicines and other phar-

maceutical ingredients (APIs). Yuhan also received

the Korean government’s prestigious USD-200-million

Tower Order of Export in 2017.

Yuhan’s R&D Reinforcement Plans enabled a KRW 17.2

billion increase in R&D expenses over the previous

year, allowing us to invest 103.7 billion in 2017 in to-

tal. In addition to our efforts to increase in-house R&D

competencies, we have strived to develop innovative

and differentiated new medicines globally through an

Open Innovation initiative and cooperation with our

overseas partners. As a result, we have secured a num-

ber of pipelines. In particular, the 3rd generation non-

small-cell lung cancer treatment YH25448 is in phase

II clinical trials, while our subsidiary ImmuneOncia ob-

tained approval for phase I clinical trials of IMC-001,

an immunotherapy to fight cancer, from the Korean

Ministry of Food and Drug Safety in February 2018.

We expect these products to be commercially compet-

itive in the domestic market within the next couple

of years.

In addition, to reinforce our existing business, strate-

gic investments were made in companies with relevant

expertise: a livestock vaccine R&D specialist, BioPOA;

an implant specialist, Warantec; and an incrementally

modified drugs (IMDs) specialist, AddPharma Inc. In

May 2017, Yuhan Corporation founded Yuhan Philia,

a wholly owned subsidiary specializing in the beauty

and health business to secure its driving force of fu-

ture growth. As part of the foregoing efforts, we soon

expect to launch a new health supplement developed

after two years of R&D by combining cutting-edge

technology with natural extracts.

The aforementioned efforts have been coupled by our

commitments in overseas markets. After the success-

ful launch of a representative office in Uzbekistan, we

added another representative office in Vietnam and

set up a subsidiary in San Diego. With more subsid-

iaries in the works, Yuhan Corporation is expanding

its global network to tap the into biopharmaceutical

information and infrastructure of medically advanced

countries to enable global clinical trials and facilitate

licensing out, and to invest in prospective bio ven-

tures.

ME

SSAG

E FR

OM

TH

E C

EO

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Message From The CEO — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Message From The CEO11

Jung-Hee Lee

President & CEO, Yuhan Corporation

2018 Business Slogan

New Challenges, Creating New Values

These stellar performance results of the past year owe

much to our stakeholders for their continued support and

trust in Yuhan Corporation. Once again, I want to take

this opportunity to deliver our deepest gratitude to you on

behalf of everyone at Yuhan Corporation.

Another challenging year for the Korean pharmaceutical

industry is forecast for 2018, faced with continued pres-

sure from various regulations and intensifying market

competition. In meeting these challenges, we have de-

vised the business slogan “New Challenges, Creating New

Values” as a symbol of our tireless commitment to gen-

erating new value with an enterprising spirit. Everybody

at Yuhan Corporation will devote themselves to attaining

goals they set for each business area so as to enhance not

just corporate value but also shareholder value.

Behind the remarkable accomplishments that Yuhan Cor-

poration has achieved over the past 92 years was your

unwavering trust in us. In return for that trust, the 1,700

employees of Yuhan Corporation will make concerted ef-

forts to grow alongside stakeholders while ensuring the

growth of the company.

Thank you.

5

We never stopworking towardscreating innovative value

11% year-on-year growth of sales for 20171,462.2 KRW billion

In addition to Yuhan’s joint venture agreement on a

3,000-bed Qingdao Severance Hospital, which is to

open in 2020, the company also signed a memoran-

dum of understanding with China’s export & invest-

ment specialist, Hiking Group, securing a foothold in

Chinese markets yet untapped.

Yuhan Corporation has also been maintaining a ro-

bust financial structure. As proven by multiple acco-

lades from prestigious institutions: the honorary Pres-

idential Prize at the National Productivity Awards in

recognition of our contribution to the development

of the national economy and industry; and the grand

prize at the Citizen’s Coalition for Economic Justice’s

Good Enterprise Awards. In fact, we were named Ko-

rea’s Most Admired Company in the pharmaceutical

industry for the 15th consecutive year in 2017 by the

Korea Management Association, and ranked second

in the All-Star category by the organization.

Message From The CEO — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Message From The CEO 1413

Securing sustainable growth through

improving profitabilityYuhan Corporation is increasing R&D investments to raise the contribution of its in-house developed

products to overall sales. The improved product portfolio will help achieve quality growth and

higher profitability in its business portfolio. The surplus profits from improved portfolios are then reinvested into R&D activities and new busi-ness opportunities, eventually creating a virtuous

cycle of more returns and reinvestments.

20

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1,462.21,320.8

1,128.7

Sales Growth (KRW billions)

2017

2016

2015

Yuhan Corporation has sustained

growth over the past three years

through the strategic promotion of

high-return IMDs, successful market

debuts of new brands, increased

API exports, and expansion of

business.


Promoting IMDs

-->enhancing profitability and competitiveness

Bolstering proprietary brands

-->securing stable revenue streams

Increased exports

-->securing global competitiveness

1

2

3

Reshuffling our product portfolio

allowed for higher cost rates to

eventually prop up the company’s

profitability.

Increased API Exports & Market ExpansionsYuhan Corporation supplies its leading global internation-

al clients with active pharmaceutical ingredients (APIs) for

the treatments of AIDS, arthritis, hepatitis C and antibiot-

ics. To date, exports have been a major source of revenue

for the company, accounting for the vast majority of its

revenue structure. While strengthening its relationships

with existing clients, Yuhan Corporation actively attracts

new projects as sustainable growth engines with the aim

of reinforcing its profitability from new client.

As part of our overseas expansion plan, we opened a rep-

resentative office in Uzbekistan in 2016 and another one

in Vietnam in 2017 in pursuit of new business opportu-

nities. Furthermore, we entered into a memorandum of

understanding with China’s Hiking Group for a business

alliance, thereby securing a foothold for forays into Chi-

na’s markets for pharmaceuticals, health supplements and

beauty items.

Going forward, Yuhan Corporation will continue its ef-

forts for higher profitability by reshuffling its product port-

folios through promotion of IMDs and proprietary brands

to achieve quality growth in markets abroad.

Promoting High-Return IMDsIn 2017, Yuhan Corporation successfully fostered its in-

house developed ETC products, including Rosuvamibe, a

combination hyperlipidemia treatment, and Duowell, a

combination treatment for hypertension and hyperlipid-

emia. Both turned into megabrands and have had sales of

more than KRW 10 billion. Of particular note was Rosu-

vamibe. Launched in 2016, it achieved a whopping 180.6

percent sales growth reaching KRW 22.3 billion in 2017,

successfully establishing itself in the hyperlipidemia com-

bination treatment market only its second year. With its

vast marketing know-how in promoting megabrands, Yu-

han Corporation will continue to use its strong marketing

power to help new IMD products quickly establish them-

selves in the market.

Bolstering Proprietary Brand Power Last year, Antiphlamine and Beecom-C, two flagship

brands, recorded more than 20 percent sales growth over

the previous year with their sales of KRW 19 billion and

KRW 12.7 billion, respectively. Megatrue also joined the

megabrand line-up in 2017 with sales of KRW 11.3 bil-

lion. Sustained growth for the coming years is expected

thanks to high brand recognition through our aggressive

marketing campaigns. Happy Home also succeeded in the

domestic pesticide market with sales of KRW 10.8 billion

in 2017. Through full quality control, we will make Happy

Home a pesticide brand trusted by consumers that also

contributes to higher profitability.

Promoting High-Return IMDs

Bolstering Proprietary Brand Power

Increased API Exports & Market Expansions

1110 Securing Sustainable Growth through Improving Profitability — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Securing Sustainable Growth through Improving Profitability


+19.9%Increase of R&D Investment

Active Pharmaceutical

Ingredients

(APIs)

Breakthrough

Therapies

Yuhan’s R&D investments increased

to KRW 103.7 billion in 2017,

up 19.9 percent compared to 2016’s

KRW 86.5 billion. We will continue

increasing the investment size

in the future.

Year-on-year Growth Rate

Incrementally

Modified Drugs

(IMDs) 20

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Developing new value by

strengthening R&DThrough consistent R&D investments and our Open Innovation initiative, we are striving for breakthrough therapy R&D, IMD development

and API export expansion.


We are strengthening strategic R&D

networks in pursuit of industry-

academy-research collaboration with

prospective ventures and universities.

Through the Open Innovation initiative, more than KRW 120 billion has been invested in 15 companies

over the past three years.

Venture companies

Universities & Research institutes

International partner

companies

Open Innovation

1716

YH25448 YH25724

A next-generation EGFR targeted anti-cancer drug

A novel treatment for non-alcoholic steatohepatitis

Efficacy EfficacyCurrent Stage Current Stage

726

2015

865

2016

1,03

72017

18

5IMD pipelines – 5 substances

A third-generation mutant EGFR inhibitor treatment for non-small cell lung cancers

Slated for completing phase II clinical trials by 2018

Excellent anti-cancer effects, with a favorable safety profile at the escalated

doses such as reduced skin rashes or diarrhea, and superior efficacy in treating

brain metastasis of lung cancers

Preclinical studies on non-alcoholicsteatohepatitis as the primary indication

and also planned on diabetes and obesity for the future

A new breakthrough biologics candidate substance effectively taking advantage of Genexine’s hybrid Fc fusion protein

platform technology

Effective for non-alcoholic steatohepatitis as observed in the growing number of obesity and metabolic disease patients

among the major causes of chronic liver diseases

Yuhan Corporation has been engaged in its Open Inno-

vation initiative to expand its R&D pipelines and to cap-

ture new technologies. The company has been securing

source technologies and expanding the R&D pipelines

through active equity investments in bio venture compa-

nies such as Bioneer and Genexine since 2015. In 2016,

Yuhan's R&D efforts in cancer immunotherapy gained

momentum with the establishment of ImmuneOncia, a

joint venture with the U.S. biotech company Sorrento.

In 2017, the third-generation EGFR inhibitor YH25448

that utilizes technology imparted from Oscotec success-

fully completed phase I clinical trials, with phase II clinical

trials slated for 2018. Furthermore, Yuhan's collabora-

tion with Genosco (the U.S. subsidiary of Oscotec) will

expand to include joint R&D on anti-cancer drugs such

as the fourth-generation EGFR inhibitor and new kinase

inhibitor.

Yuhan's two-year investments showed real promise in

2018 when ImmuneOncia’s cancer immunotherapy IMC-

001 obtained approval for phase I clinical trials. More

cancer immunotherapies are currently in the R&D pipe-

line. Additionally, Yuhan's joint R&D project on cancer

immunotherapy antibodies with an antibody R&D spe-

cialist, Abclon, resulted in a new cancer immunotherapy

candidate called YHC2101.

Plus, Yuhan's new biologics YH25724, developed by

Genexine’s hybrid Fc fusion protein platform technology,

is expected to increase applicable indications to metabol-

ic diseases such as diabetes and obesity and to be a major

pipeline. In early 2018, Yuhan established a subsidiary,

Yuhan USA in San Diego, as a foothold to Yuhan's global

open innovation drive. Yuhan USA will spearhead Yu-

han's global expansion initiatives and serve as the center

of Yuhan's open innovation initiative for various clinical

trials and new therapeutic R&D efforts. By creating syner-

gies with Yuhan's major domestic R&D projects, it will be

at the forefront of Yuhan's efforts of gathering advanced

industry information and pursuing pipeline expansion op-

portunities, as well as securing new joint R&D and invest-

ment opportunities with international partners.

Through these strategic alliances and open innovation

drive, Yuhan Corporation is strengthening its future

growth engines by increasing breakthrough therapeutic

pipelines from nine in 2015 to 18 and five IMDs as of

March 2018.

Developing New Value by Strengthening R&D — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Developing New Value by Strengthening R&D

Breakthrough therapeutic pipelines – 18 substances

R&D Investment Expenses(KRW 100 million)


Creating new business opportunities

for further growth

Yuhan Corporation constantly pursues new business opportunities to secure its future growth

drivers. In May 2017, we established a beauty health specializing subsidiary called Yuhan Philia. In March 2018, we marketed a premium health

supplement brand called New Origin, taking steps toward becoming a total healthcare company. By drawing on the technology and know-how that we have accumulated in pharmaceuticals

research, we will expand our business scope into health supplements and the beauty & health

business to complete a virtuous cycle for sustainable growth.

Creating New Business Opportunities

Through the technology and know-how which

we have accumulated in pharmaceutical research,

we will expand our business scope into health

supplements and the beautycare business to

complete a virtuous cycle for sustainable growth.

TOMORROW'S LIFECARE PARTNER

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BeautyFood & Health

A Total LifecareCompany

2322

Food & HealthRedefine the origin of food

Creating New Business Opportunities for Further Growth — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Creating New Business Opportunities for Further Growth

Public interest in health is growing in paral-

lel with an enhanced quality of life, increasing

chronic diseases in an aging society, and higher

public awareness of preventing diseases. Accordingly,

market demand is growing for health supplements and

a balanced dietary culture. In response, Yuhan Corpo-

ration has been introducing its OEM health supple-

ments to the market since 2013. More recently, Yuhan

has separated the health functional food division from

the pharmaceuticals division to introduce more innova-

tive health supplements by drawing on our technolo-

gy and know-how accumulated in the pharmaceutical

business know-how.

Diversifying business portfolio diversification began

with the set-up of a health supplement task force

team (TFT) in 2016. After setting the business direc-

tions and reshuffling the organization in early 2017,

the new TFT concluded the brand launching plans and

business directions by the end of the year. The new-

ly launched Food & Health Business Department is in

charge of verifying and sifting through the entire value

chain of health supplements and health foods seek-

ing differentiated brands. Yuhan determined to be a

trendsetter with eco-friendly and organic products that

have high growth potential in the health supplements

market, which had traditionally been dominated by ge-

neric version drugs. To that end, we pre-launched the

new premium health food brand New Origin in March

2018 and plan to market 40 products in the first half of

2018. In April 2018, the first New Origin store opened

at the IFC Mall in Yeouido, Seoul.

New Origin: A Premium Health Food BrandIn 2017, we launched the premium health food brand

New Origin under the slogan of "Redefine the origin

of food." As the name suggests, New Origin reflects

Yuhan's determination to going back to the basics of

foods by pursuing the origins of foods. Its extensive

product line-up taps into our industry-leading know-

how and market trust and pushes the envelope of

conventional health supplements. Its product line-up

encompasses ginseng, deer velvet and lutein from our

contracted farms and rare items like salt from the Kala-

hari Desert. Cultivated in farms in primitive ar-

eas near the DMZ under exclusive subcontracts

with Yuhan, red ginseng products are made to

contain all of it from its roots, leaves and fruits in a bot-

tle; deer velvet products are made from the extracts of

velvet of the top one percent of deer from a deer farm

of 198,347,107 m2 in size through joint research with

New Zealand’s Royal Research Center for Agriculture;

lutein products are made by a supercritical extraction

(hexane free) technique to extract from Marigold flow-

ers grown in an exclusively contracted farm in India.

After the successful pre-launching on March 29, 2018

at pop-up store events at Shinsege Department Stores

in major cities in Korea, the first flagship store opened

at the IFC Mall in Yeouido on April 16. Starting with 10

products on promotional sales, 26 more products are

to be marketed from April, with the aim of launching

a total of 40 products. These newly launched products

are also available on New Origin’s official website, var-

ious open markets, and flagship stores. Yuhan plans to

open more stores under differentiated concepts within

major shopping malls, department stores and major

locations in the future.

BeautyCosmeceuticals: A Synergy between Cosmetics and

Pharmaceuticals


TO BE GREAT YUHAN,

GLOBAL YUHAN

2524 Creating New Business Opportunities for Further Growth — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Creating New Business Opportunities for Further Growth

In order to harness the high growth potential

of the cosmeceuticals market, which sophis-

ticatedly combines pharmaceuticals technolo-

gy with cosmetics, Yuhan Corporation established

Yuhan Philia, a non-listed subsidiary specializing in

beauty and health, in May 2017. As the name “phil-

ia” suggests, Yuhan Philia embodies the founder Dr.

Ilhan New’s life and philosophy of denoting fondness

for others. The company launched the premium baby

spa brand Little Mama in December 2017. Little Ma-

ma’s main product line-up includes organic cosmetics

and baby spa items, and also introduces Na True's spa

products that have been certified for natural/organ-

ic cosmetics and vegans. As soon as marketed, Little

Mama was selected as one of the hit products of the

year in 2017 and topped the baby spa skincare catego-

ry at the 2018 Baby Best Brands Awards. As of

March 2018, Little Mama products have been

available through online shopping malls and at

approximately 35 offline stores, including premium

lines of baby & children’s products select shops, major

Korean department stores and road shops. It is also

supplied as amenities at several Korean premium hotel

chains, such as the Walkerhill, Ananti and Grand Hy-

att. The distribution channels will be further expanded

to overseas markets in the future. Starting with Little

Mama, Yuhan will further expand the category of our

beauty business to kids and pregnant women and

eventually a family product market.

2726

Boundless Dreams for the Health

and Happiness ofEveryone

Corporate Philosophy

Manufacturing High-Quality Medicines

Back in 1926 when he established Yuhan Corporation,

Dr. Ilhan New chose to pursue a pharmaceutical busi-

ness that could directly contribute to public health in

order to address the difficulties Korean people were fac-

ing who suffered from the tyranny of colonialism. This

was based on his belief that only healthy people can

reclaim their lost sovereignty. Since then, contributing

to the promotion of the nation’s health and happiness

through production of quality medicines has remained

Yuhan’s most vital corporate philosophy.

Paying Taxes without Omission

Dr. Ilhan New believed that the paying of taxes in full

underpins a company’s most basic social responsibility

and that the accumulation of wealth from business ac-

tivities must be returned to the country through faithful

tax payments. Without a doubt, the faithful payment

of taxes helps lay the foundation of a nation’s develop-

ment, and paying taxes on all profits generated from

business activities is tantamount to fulfilling a compa-

ny’s national obligation. In short, the faithful payment

of taxes can be seen as an expression of patriotism and

serves as Yuhan’s corporate philosophy.

Giving Back to Society

Our most imperative corporate philosophy can be sum-

marized as follows: Profits earned by a company’s activ-

ities must be returned to society. This begins from our

founder’s belief that a company belongs to the society it

serves with its leaders acting as mere stewards entrusted

with its care. Yuhan creates jobs and fulfills its social

responsibilities by sharing its profits from its corporate

activities to bring about better society.

Vision

GREAT YUHAN, GLOBAL YUHAN:

Progress & Integrity

Yuhan Corporation has been dedicated to public health

since its foundation by Dr. Ilhan New in 1926. Taking

pride in our commitment over the past nine decades, we

are now poised to work harder for a greater future. Our

new challenge begins by taking a huge step forward

on our way to becoming a truly great company and a

relevant global entity. This advancement will be based

on our unique core values of progress and integrity. We

are determined to be a great company that fulfills its

corporate social responsibilities by sharing our corporate

value with society, while also ensuring we are a lasting

company by preserving our core values and proactive-

ly responding to changes in the business environment

worldwide. On our way to celebrating our centennial

anniversary, Yuhan will stay committed to remaining a

global company that contributes to the health and hap-

piness of everyone through the development of break-

through therapies and new businesses. Our underlying

goal is to be “Great Yuhan” and “Global Yuhan,” a

company that is proud to contribute to the health and

happiness of the global community.

Yuhan Corporation has contributed to the enhancement of public health through the production of high-quality medicines. At the same time, it has advanced into various businesses such as health-related foods, household products, animal drugs, and cosmetics in pursuit of higher corporate value and sustainable growth.Unrelenting R&D efforts have played a pivotal role in our commitment to developing innovative medicines as we embrace the global market. Growing beyond quantitative growth as the nation’s leading pharmaceutical company, we are now considered one of the most respected companies in Korea and a major contributor to social initiatives throughout the country. With a sense of duty to improve people’s health and carry on an enterprising spirit, Yuhan Corporation is growing into a competitive global entity.

GREAT YUHAN, GLOBAL YUHAN


Core Values

Corporate Philosophy

VisionPaying Taxes without Omission


Manufacturing High-Quality Medicines

Corporate Overview — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Corporate Overview

2928

* Based on consolidated financial statements

TOTAL ASSETS(Unit: KRW in billions)

2,094.7TOTAL LIABILITIES(Unit: KRW in billions)

488.3TOTAL SHAREHOLDERS’ EQUITY

(Unit: KRW in billions)

1,606.3

Sales by Business Ratio

CONDENSED INCOME STATEMENT(Unit: KRW in billions)

Sales

Operating income

Income before taxes

Net income

2015

1,128.7

85.8

168.3

126.0

2016

1,320.8

97.8

204.9

161.2

2017

1,462.2

88.7

144.9

109.6

YoY Change

10.7%

-9.3%

-29.3%

-32.0%

PHARMACEUTICALS

(Unit: KRW in billions)

Sales by Business(Unit: KRW in millions)

Non-prescribed

Prescribed

Yuhan Medica & MG

Internal sales adjustment

Sub-total

2017

117,148

941,048

27,120

-17,072

1,068,244

2016

106,941

836,777

15,778

-7,451

952,045

YoY Change

9.5%

12.5%

71.9%

12.2%

1,068.2

(73.1%)

Exports

Domestic

Yuhan Chemical

Internal sales adjustment

Sub-total

2017

260,634

5,006

190,210

-189,998

265,852

2016

246,439

5,725

173,619

-173,167

252,616

YoY Change

5.8%

-12.6%

9.6%

5.2%

OVERSEAS

265.9

(18.2%)

HEALTH CARE &CONSUMER PRODUCTS

Household products

AHC

Sub-total

2017

102,299

13,828

116,127

2016

89,143

13,023

102,166

YoY Change

14.8%

6.2%

13.7%

116.1

(7.9%)

OTHER

Lease and trust

2017

12,025

2016

13,970

YoY Change

-13.9%

12.0

(0.8%)

2015

2016

2017

OPERATING INCOME(Unit: KRW in billions)85.8

97.8

88.7

126.0

161.22015

2016

2017

NET INCOME(Unit: KRW in billions)

109.6

1,128.7

1,320.8

1,462.2

SALES(Unit: KRW in billions)

2015

2016

2017

2017 Financial Highlights

2017 Financial Highlights — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — 2017 Financial Highlights

3130

2017 News Highlights

JANUARY

Acquisition of a 35 Percent Share in Warantec,

a Dental Implant Maker

Yuhan Corporation entered the dental equipment business

with the acquisition of shares in a Korean dental implant

manufacturer called Warantec on April 24, 2017. Acquiring

35 percent of outstanding shares, Yuhan has now become

the largest shareholder of Warantec. We will be the first Ko-

rean company to supply both national and imported implants

to dental clinics and hospitals through Warantec. Down the

road, we have completed a long-term roadmap of expanding

our business scope into dental materials, medical equipment

and digital devices.

MAY

Establishment of Yuhan Philia, a

Beauty & Health-specialized Subsidiary

Yuhan Corporation established Yuhan Philia, a subsidiary spe-

cializing in the beauty and health businesses, on May 1, 2017.

The new subsidiary is entrusted with independence in its op-

eration so as to effectively cope with the rapidly changing

trend of the beauty industry according to consumer lifestyle

changes, which will not only ensure expertise but efficiency

in business activities. Yuhan Philia will continue building up

its brand competencies in the beauty and health industries,

while gradually introducing its own brands and supplying

beauty products to Yuhan Corporation.

Excellent Practices of Gender Equality in Employment

Yuhan Corporation received the Labor Minister’s commenda-

tion for its excellent accomplishment in gender equality at

work at the 17th Gender Equality in Employment Campaign

Awards on May 31, 2018. The company has strived to realize

gender parity at work through various initiatives, including a

high female employment rate that is more than double the

industry average, fair recruitment procedures regardless of a

person’s background, a 100 percent year-on-year growth rate

of female managers to overall managerial level employees,

and expanded employment of female workers. Additionally,

we support employees in balancing between work and their

personal life through generous programs such as the flexible

work time system, special paid summer vacations, and pro-

motion of continuous long-term vacations.

JUNE

Excellent Prize winner at the 2017

Green Companies Awards

Yuhan Corporation won the Excellent Prize at the 7th 2017

Green Companies Awards on June 22, 2017. The Ministry of

Environment and Korea Environmental Industry and Technol-

ogy Institute selects and awards best performers annually in

promotion of green companies and eco-friendly management

practices. Yuhan Corporation earned high scores in all the

environmental management evaluation criteria of the envi-

ronmental management system-building, resource & energy

conservation, greenhouse gas and pollutant emission reduc-

tion and CSR performance.

SEPTEMBER

Excellent HRD Performer Certification

Yuhan Corporation received the Excellent Performer certifi-

cate at the 2017 Excellent HRD Certification ceremony from

the Korea Industrial Human Resources Corporation (KIHRC)

on September 25, 2017. Yuhan was the only recipient among

pharmaceutical companies that were newly certified in 2017.

KIHRC annually certifies excellent performers who meet ex-

emplary standards for HRD and HRM to promote HRD invest-

ments nationwide.

OCTOBER

Presidential Prize Winner at the National Productivity

Convention

Yuhan Corporation won the Presidential Prize—the grand

prize in the corporate/group category—at the 41st National

Productivity Convention, which is hosted by the Korea Pro-

ductivity Center and the Ministry of Trade, Industry and En-

ergy. The prize was offered in recognition of our consistent

endeavors toward competency-building through R&D inno-

vation and global expansion in pursuit of sustainable growth

as a leading pharmaceutical company and commitment to

sustainable growth through advanced HRM practices and a

CSR-driven corporate culture.

NOVEMBER

Joint Venture Agreement on Qingdao

Severance Hospital

Yuhan Corporation entered into a joint venture agreement

with Hiking Group on Qingdao Severance Hospital on No-

vember 20, 2018. Yuhan is contributing KRW 200 billion to

the 3,000-bed hospital that is being built by Korea’s Yonsei

University Hospital. Slated to open by the end of 2020, Qin-

gdao Severance Hospital is expected to see high growth po-

tential as a profit-generating hospital. In particular, Qingdao

Severance Hospital is a key project of the Shandong provincial

government’s policy of creating a CNY 10 billion Lao Penglai

Health District. Nursing homes, medical colleges and hotels

are to be built within the district in the near future. Yuhan

Corporation has successfully made an early entry into the

Chinese profit-generating hospital project and is expected

to have more access to China’s healthcare businesses in the

future.

DECEMBER

Recipient of the USD 200 Million Export Tower

Yuhan Corporation exported more than USD 200 million

between July 2016 and June 2017. In recognition of this

achievement, the Korean government awarded the compa-

ny the USD 200 Million Export Tower at the 54th Trade Day

ceremony in December 2017. Previously, the company has

received the USD 50 million Export Tower (2007), the USD 70

million Export Tower (2008) and the USD 100 million Export

Tower (2013).

MOU Concluded with Hiking Group

Yuhan Corporation signed a memorandum of understand-

ing with China’s Hiking Group on December 11, 2017. The

agreement calls for a friendly business alliance with the

group, which has strong market power as Shandong’s top

exporter, securing a foothold in the Chinese medical, health

supplements and beauty product markets.

2017 News Highlights — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — 2017 News Highlights

3332

Board of Directors

BOD-led rational decision-making ensures transparency and accountability in our business management practices, the key factors to a trusted company.

By carrying out responsible management practices that

are led by the company’s board of directors (BOD), Yu-

han Corporation strives to maintain the full trust of all

its stakeholders, from employees and customers to com-

munities and shareholders. As of March 2018, Yuhan’s

BOD consisted of nine members, including three outside

directors who were appointed at its general sharehold-

ers’ meeting.

IN-YOUNG KO

Outside Director / Professor of Medical Biotechnology, Kangwon National University

SOON-CHUL CHUNG

Outside Director / Attorney, JKL Law Firm

CHUL LEE

Outside Director / Chief Medical Officer, Hanaro Medical Foundation

JUNG-HEE LEE

President & CEO

WOOK-JE CHO

Executive Vice President /Head of Pharmaceutical Business Center

CHONG-HYUN PARK

Executive Vice President /Head of Planning and Management Center

JAE-GUL WOO

Auditor / Standing Auditor

SEOK-BEOM YOON

Auditor / Senior Tax Accountant Lee & Ko Tax Services

BYUNG-MAN LEE

Executive Vice President /Head of Business Management Division

SANG-CHUL KIM

Executive Vice President /Head of Pharmaceutical Business Effectiveness Division

YOUNG-LAE LEE

Executive Vice President /Head of Manufacture Center

The BOD makes decisions and offers advice that shapes

the backbone of the company’s management activities.

All of the BOD’s decisions are made in the interest of

shareholders and maximize Yuhan’s corporate value from

an ongoing and long-term perspective. In 2017, the BOD

held 8 meetings to decide on a total of 27 agenda items.

Board of Directors — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Board of Directors

3534

documents minutes of all BOD meetings, recording the

subject agenda, proceedings, resolutions, objections, etc.

All the records are to be signed by the directors in atten-

dance. In 2017, a total of eight BOD meetings, including

four regular and four extraordinary meetings, were held,

with a 100 percent attendance rate.

Working CommitteesDespite the fact that Yuhan is not obligated to establish

subcommittees within the BOD under the current law, the

company has done so by forming several working commit-

tees consisting of its internal directors and top manage-

ment board for following purposes.

Steering Committee

Consisting of members appointed by the president from

among directors and executives, the Steering Committee

promotes exchange of management information among

members and advises the president in making manage-

ment decisions, while preparing an agenda for to BOD

meetings.

New Product Marketing Strategy Committee

The committee was formed for the efficient organization

and marketing of new products in order to reinforce the

company’s product competitiveness. Chaired by the presi-

dent, the committee is comprised of the head directors of

the Pharmaceutical Business Center, Planning and Man-

agement Center and Manufacture Center.

R&D Committee

The committee reviews R&D strategies. Chaired by the

president, the committee members consist of the head

directors of the Planning and Management Center, Phar-

maceutical Business Center and the Yuhan R&D Institute.

Employee Advisory Committee

This committee promotes the effective bottom-up com-

munication and supports building the mechanism required

for such communication. The creative ideas and opinions

of employees may reach the top management and the

president with their management practices through this

committee. Its members are selected from among the ju-

nior-ranking employees from all sectors of the company.

Public Relations Committee

The committee sets the plans and directions for efficient

corporate public relations and advertisements. Chaired by

the president, the members include the chief officers in

charge of marketing and public relations, as well as the

research team manager and the head director of the Phar-

maceutical Business Center.

Performance Evaluation & CompensationYuhan Corporation does not evaluate the performance of

outside directors at the moment, but the company zeal-

ously follows the procedures as stipulated in the Korean

Commercial Act when it selects new outside directors. To

ensure fair and transparent procedures of selecting and

appointing outside directors, we scrutinize the qualifica-

tions of outside director candidates, not merely by satis-

fying what is required under the Act, but by applying our

own criteria of expertise, sense of fairness, job ethics and

integrity before recommending them to the shareholders

for appointment. Remuneration to directors is determined

by resolutions at the general shareholders’ meeting, and

retirement benefits are stipulated in the regulations con-

cerning the retirement benefits of executives as resolved

by the general shareholders meeting. Compensations to

directors are carried out objectively in reflection of the

company’s financial performance results, such as sales,

growth rates and operating profit growth rates.

Corporate Governance

Yuhan Corporation is one of the first corporate entities in a country where the economy is largely dominated by family-run conglomerates to have a management board completely independent from its owners. Guided by Yuhan’s founder Dr. Ilhan New’s business philosophy that a company belongs to the society it serves and its leaders are mere stewards entrusted with its care, Yuhan has a unique corporate governance, with the largest shareholders consisting of non-profit organiza-tions and professional business leadership en-abling independent and responsible management.

Ownership StructureYuhan’s average number of shares outstanding was

11,902,084 shares at the end of 2017. The Articles of

Incorporation stipulates that the company is authorized

to issue a total of 15 million shares of par value at KRW

5,000. Of the total outstanding shares, 11,665,896 were

registered common shares and 236,188 were non-voting

registered preferred shares. The two largest shareholders

of Yuhan Corporations are non-profit organizations: the

Yuhan Foundation; and Yuhan School. Other sharehold-

ers include institutional and international investors. The

largest shareholder is the Yuhan Foundation, which holds

15.46 percent of total outstanding shares in Yuhan, fol-

lowed by Yuhan School, which holds 7.6 percent. The Ko-

rean Commercial Act stipulates that the notice for conven-

ing a general meeting of shareholders may be dispatched

by electronic data. However, Yuhan Corporation notifies

shareholders of the general meeting through newspapers

and by mail to all shareholders’ registered addresses so

that none of its shareholders is prevented from exercising

their vested rights as shareholders.

Yuhan’s Unique Corporate GovernanceYuhan Corporation’s governance is different from those of

many other Korean companies. Its largest shareholder is

not a family member of the founder but a non-profit orga-

nization: Yuhan Foundation. Founder Dr. New donated all

of his stocks to the Yuhan Foundation and Yuhan School

before passing away in 1971. Consequently, the Yuhan

Foundation became the largest shareholder. Since then,

these two shareholders have committed the dividends

from their shares in Yuhan Corporation to various social

contribution programs. As a result, Yuhan Corporation is

more a public entity than a privately owned company. It

has also selected its president through an internal recruit-

ment system, which is equally open to all of its employees

and is in line with the founder’s business philosophy that

a company does not belong to a person but to society.

This kind of open and transparent governance structure

has steered Yuhan clear of wrongful arbitrary decisions of

any individual and has fostered a mature corporate cul-

ture where the leadership position is entrusted to talented

people who have grown alongside the company. Major

decisions are made through close consultation between

the board of directors and management, enabling more

reasonable and responsible management practices.

Independent BODPursuant to the Articles of Incorporation, the board of di-

rectors (BOD) consists of at least five or more directors.

The five-member board is in accordance with the Com-

mercial Act’s requirement to appoint at least three direc-

tors [Paragraph 1, Article 383] and meets the minimal

number of directors required for the company’s business

operations. As of April 2018, Yuhan’s BOD members stood

at nine directors (six internal and three outside). The three

outside directors account for more than a quarter of the

total number of directors and such structure is in line with

Paragraph 8-1, Article 542 of the Korean Commercial Act

which requires a specific quorum at a BOD meeting in, in

order to ensure the independence and autonomy of out-

side directors against top management and shareholders

with controlling interests.

BOD OperationsYuhan’s BOD holds regular meetings every quarter and ex-

traordinary meetings whenever needed. The chairman of

the BOD convenes meetings by notifying each director at

least seven days prior to the date of the meeting. The noti-

fication requirements may be waived upon the unanimous

consent from all BOD members. The company also pro-

vides telecommunications means to directors who cannot

be present at a BOD meeting. Furthermore, the company

Public Relations Committee

Employee Advisory Committee

R&D Committee

New Product Marketing Strategy Committee

Steering Committee

Two auditors

General Shareholders’

Meeting

Board of Directors (six inside and three

outside directors)

President & CEO

Yuhan Corporation Organization

Corporate Governance Structure

Corporate Governance — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Corporate Governance

3736

Ethical Management

Virtuous management is our core principle dic-tating ethical management practices at Yuhan Corporation. Our systematic compliance program constitutes the framework for transparent man-agement activities. More recently, we obtained the Anti-bribery Management Systems Certifica-tion (ISO 37001), which is a clear indicator of our commitment to compliance.

Compliance Management

Compliance Program

To create new corporate value pursuant to the founder’s

philosophy, Yuhan Corporation adopted a Compliance

Program (CP) in 2007 and has established an exemplary

compliance management system since then. Everyone at

Yuhan Corporation weaves the CP into their daily business

activities in a fair and transparent manner, and abides by

the Fair Transaction Act. The adoption of the CP set the

framework for systematic legal compliance, allowing the

company to prevent violations of the fair transaction rules

and set up the framework for transparent and legitimate

management practices.

Compliance Program Framework

By adopting a new enterprise resource planning (ERP) sys-

tem, Yuhan Corporation has developed a system for more

efficient and integrated management of its company-wide

resources at any stage, from production and logistics to

finance, accounting, marketing, procurement and inven-

tory controls. The enhanced transparency in accounting

management has allowed us to systematically manage

CP operations under the revised the Medical Devices Act,

which imposes more stringent obligations on manufac-

turers with regard to mandatory expenditure reports on

economic benefits and other offerings.

Compliance Program Education

Yuhan Corporation provides its employees with CP educa-

tion in order to instill the corporate values of integrity and

honesty to foster a culture of compliance while remaining

business-friendly. The video conference system at all our

worksites facilitates education anytime from anywhere on

the latest changes in the compliance program, and allows

for prompt responses to such changes. In addition, offline

sessions customized to the individual needs of each divi-

sion are provided to new employees and employees work-

ing at the headquarters, plants, research institutes and

branch offices. Professional instructors from outside the

company are also invited frequently to give more in-depth

CP education.

Anti-bribery Management Systems (ISO 37001)

Developed by the International Organization for Standard-

ization (ISO) through consensus among the international

community, the Anti-bribery Management Systems (ISO

37001) Certification specifies requirements and provides

guidance for establishing, implementing, maintaining,

reviewing and improving an anti-bribery management

system. It is designed to be applicable in any given orga-

nization.

Anti-bribery Management Systems Certification

With the aim of expanding a compliance culture by erad-

icating bribery practices and of furthering its corporate

competitiveness for sustainable management, Yuhan Cor-

poration obtained the ISO 37001 certification in March

2018. The certification process helped the company iden-

tify its potential corruption risks and come up with solu-

tions. It also helped promote the interest in and efforts

towards CP that had been concentrated in a handful of

departments and made such interest and efforts a com-

pany-wide initiative. Furthermore, we have established

a system for reporting any corruptive practices, such as

solicitation or bribery by insiders at Yuhan Corporation

or employees of its affiliates. As a result, Yuhan Corpora-

tion was able to significantly lower the level of legal risks

concerning corruption or bribery, thereby improving the

company’s reliability.

Anti-bribery Management Systems Operational Plans

Yuhan Corporation will continue developing its anti-brib-

ery management systems operations. Most of all, regular

anti-bribery education and pledges will help raise our em-

ployees’ anti-bribery awareness and make such under-

standing part of our corporate culture. By evaluating the

effectiveness and success of the anti-bribery management

systems operations, we will effectively discern, analyze

and assess past, present and future corruption risks so

as to develop the anti-bribery system into a stable and

well-established system. Furthermore, we will also provide

related education and guidelines to our business partners

so that our commitment to anti-bribery practices can take

a binding effect both within and outside the company.

Reporting System

Yuhan Corporation has in place diverse channels for re-

porting violations and bribery cases, including its website,

anonymous report bulletin board, and hotline (phone,

e-mail and fax). All reports are unprejudicedly followed

up, and the status of such report is communicated to the

complainant/reporter via e-mail and phone. The complain-

ants’ identity and the contents of the complaint remain

anonymous to protect their identity and to encourage ac-

tive reports on any wrongdoing.

CP Process

Operation of the compliance system concerning fair transaction rules & regulations

Practices (education,

monitoring and corrective actions)

CP PlanningApplication & Updates

Monitoring/Managing

Report to the CEO and Chief Compli-ance Officer

Feedback

Ethical Management — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Ethical Management


STRATEGIC PROGRESSOur BusinessPerformance

1

Pharmaceuticals Business 40p

Overseas Business 44p

Healthcare & Consumer Products Business 48p

Research & Development 52p

Production 58p

Yuhan Product Portfolio 62p

Yuhan Corporation recorded KRW 1,462.2

billion in sales for 2017 on the back of its

strategic business moves and its unique

corporate culture of sincerity and integrity.

The highest sales among all Korean

pharmaceutical companies reaffirmed its

market leadership. More specifically,

its excellent business performance results

are proven by the three-year average sales

growth rate of 13 percent and the remarkable

accomplishment by the pharmaceutical

business that exceeded KRW 1 trillion in sales

for the first time in Yuhan’s history.

With a number of pipelines under belt,

the company has higher growth potential in

breakthrough medicines. In the meantime,

our globalization effort continued as we

have laid a foundation in the Vietnamese

and Chinese markets to reinforce our global

competencies.

40

Pharmaceuticals Business

Yuhan Corporation’s pharmaceutical business produces

and sells over-the-counter (OTC) drugs, consumer health-

care products and health supplements as well as ethical

(ETC) drugs such as antihypertensive drugs, anticancer

drugs and antibiotics. It has driven the growth of the com-

pany to become a leading pharmaceutical company in Ko-

rea today. In 2017, the sector concentrated on growing

its key strategic product sales and achieved a remarkable

growth rate of 12 percent over the previous year. As a

result, its sales exceeded KRW 1 trillion for the first time

since Yuhan’s foundation.

In particular, Viread and Trajenta sold more than KRW 100

billion, making them blockbuster sellers. Moreover, a total

of 23 products, including Twynsta and Atorva, became top

products, with sales exceeding KRW 10 billion, solidifying

Yuhan’s market-leading position. On top of that, our own

brands of Rosuvamibe, Duowell, Beecom-C and Megatrue

continued to show steady sales growth.

PHARMACEUTICALSBUSINESS

Vaccines/Rehydration solutions

In-house developed new drugs

Generic drugsIn-licensed drugsIMD

ETC

Consumer healthcare productsOver-the-counter (OTC) drugs Health supplements

OTC

41

1,068.2billionKRW

Korea’s first single pharmaceutical business to exceed KRW 1 trillion in sales

2017 KEY ACHIEVEMENTS

No. of products with sales of KRW 10 billion and higherViread: a ultra blockbuster drug with sales of KRW 154.2 billion

23154.2 medicinesbillionKRW

Pharmaceuticals Business — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Pharmaceuticals Business

4342

2015

2016

2017

10,6

82

8,27

09,

520

Pharmaceutical business sales for 2017 recorded KRW 1,068.2 billion, up 12.2 percent from KRW 952.0 billion in 2016

SALES (KRW 100 million)

+12.2% YoY Change

2018 Outlook

Continued regulations and market competition are still predicted in the pharmaceuti-

cal industry, suggesting another challenging business environment in 2018. Specifically,

marketing activities are forecast to be dampened in the industry by the revised enforce-

ment law obliging medicine suppliers and medical device manufacturers to report on

their expenditures for economic benefits offered that takes effect as of January 1, 2018.

While an aging Korean society gives rise to chronic disease cases, pushing up market

demand for pharmaceuticals products, it will not be easy for Korean pharmaceutical

companies to benefit from this to generate improved profitability as the Korean govern-

ment’s healthcare policy is expanding the scope of national health insurance coverage.

OTC sector megabrands are also faced with fierce market competition, while online

distribution and marketing is expected to further increase in the coming year. In coping

with the fast-changing market environment, the ETC sales department will bolster its

expertise in sales/marketing, while maximizing sales and expanding operating profits

through the stable growth of mega brands and thorough inventory control. As it raises

the market share of key strategic products, the sector will concentrate its marketing ef-

forts on growing Clogrel (antithrombotic drug) and Metformin (diabetes treatment) into

new megabrands. More specifically, our goal for Viread, Trajenta and Jardiance is to gain

the largest market share of outpatient prescription sales on the back of their differenti-

ated competitiveness.

The OTC sales department will step up its marketing on consumers to grow megabrand

items while fostering competitive new products as new growth engines. At the same

time, the sector will realign the pharmaceutical line-up of frequently used items like cold

medicines and painkillers while enhancing market research to reflect customer needs in

its marketing strategies.

New Products in 2017

Bestselling Product in 2017

Rosuvamibe:

sales growth rate of 180.6 percent from the previous year

2017 Market Analysis

In 2017, the pharmaceutical industry had to deal with a challenging market environment

as its marketing activities were dampened by the government’s continuously strengthen-

ing regulations on the industry as a whole and the aftermath of the enforcement of the

Improper Solicitation and Graft Act (a.k.a. the Kim Young-ran Act).

Competition in the OTC market intensified with a growing number of advertisements

among pharmaceutical companies and increased sales via online shopping channels, as

well as aggressive marketing campaigns by multinational pharmaceutical companies and

diversifying information channels for consumers. The in-licensed drugs market also saw

competition become fiercer as huge pharmaceutical licenses expired in 2017, redrawing

the license-holding landscape. In the meantime, the chronic disease treatment medi-

cine market size continued to expand, which also led to the growth of the market for

biologics with strengths in intractable diseases and chronic diseases, adding up to the

fierce market competition in the overall pharmaceutical industry. The new administra-

tion’s medical policies are worried to weigh in the overall industry’s burden, which is

already suffering from a consistent low drug price policy in the aftermath of the massive

drug price cut in 2012. In response, Yuhan Corporation concentrated on reinforcing its

compliance program so as to establish disciplined marketing practices, while carrying out

product-oriented portfolio enhancement efforts in order to reinforce its market compet-

itiveness.

Antiphramine Hydro24: a patch-type topical analgesics that uses hydrogel as a patch

2017 In Review

Yuhan Corporation spent 2017 on growing sales centered on key

strategic products and promoting more products. As a result, the ETC

sales department achieved sales of KRW 941 billion, up 12.5 percent,

or KRW 104.3 billion, from the previous year. In particular, the sub-

stantial growth of product portfolios is expected to have a positive

influence on future business profitability. By product, key strategic

products led the growth, specifically Atorva, Duowell, Rosuvamibe,

Monoroba and Viread, Vemlidy®, Trajenta group and the Jardiance

group among in-licensed products. Even amid fierce market com-

petition, Viread (hepatitis B treatment) and HIV (human immunode-

ficiency virus) treatments demonstrated high growth rates, selling

KRW 154.2 billion and KRW 45.9 billion, respectively. In the circu-

latory combination market, Rosuvamibe (hyperlipidemia treatment)

achieved a whopping 180.6 percent growth over the previous year in

sales to reach KRW 22.3 billion, Trajenta group (diabetes treatments)

sold KRW 101.2 billion, while Jardiance group (diabetes treatment)

achieved a huge 364 percent growth rate from 2016 to reach KRW

13.5 billion. The OTC sales department’s overall sales recorded KRW

117.1 billion in 2017. Our marketing focus on the 10 core prod-

ucts worked out as sales growth were observed mainly in five key

products—Antiphramine, Beecom-C, Megatrue, Mag-B and Elena—

as well as five future growth engine products: Vitamin-C 1000mg,

Zyrtec, Happy Home, Contac Gold and UD-Liver Complex. We spe-

cifically channeled our resources into marketing such products as

Beecom-C, Megatrue and Mag-B to raise their contribution to the

overall product portfolio. Consequently, Antiphramine, Beecom-C

and Megatrue successfully realized stable growth in sales that ex-

ceeded KRW 10 billion. In particular, the main products achieved

high growth rates, as Mag-B sales increased 44.9 percent from 2016

while Elena sales jumped 80.2 percent.

Pharmaceuticals Business — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Pharmaceuticals Business

4544

Overseas Business


Yuhan supplies its leading global international clients

with active pharmaceutical ingredients (APIs) for AIDS

treatments, arthritis treatments, antibiotics and hepatitis

C treatments that are produced at the globally recognized

production sites of Yuhan Chemicals. While strengthening

alliances with partners, we also keep exploring new initia-

tives with new partners to sustain growth.

In 2017, global sales grew by five percent from 2016

thanks to the increased export of AIDS treatments. Going

forward, we will take a long-term approach in seeking

new strategic export projects and cross-border partner-

ships on new APIs and finished pharmaceutical products

to expand our overseas markets. In doing so, our repre-

sentative offices in Uzbekistan and Vietnam will play a key

role in our endeavors to become a leading global pharma-

ceutical company.

EXPORTS BY REGION IN 2017

– United States of America– Canada

– Ireland– Italy

– Germany– Switzerland

– China– Japan

– Vietnam– Philippines

– Thailand– Singapore

EXPORTS BY NATION IN 2017

North America

16%Europe

80%

265.9billionKRW2017 sales grew by five percent from the previous year to reach KRW 265.9 billion.

200 millionUSD Recipient of the USD 200 million Export Tower at the 54th Trade Day Ceremony

No. of countries Yuhan exported its products in 2017

12countries

Overseas Business — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Overseas Business

Japan1%

3%

Others

4746

2018 Outlook

Although we see continued growth potential in the market demand

for contract manufacturing of APIs for the coming years, there are

still possible external factors like growing protectionism and conser-

vative operations by multinational pharmaceutical companies, all of

which collectively pointing to overheated competition.

To ensure stable operations and sustainable growth, Yuhan Corpo-

ration will continue diversifying its projects in alliance with clients

while constantly seeking new opportunities for projects with new

clients through constant enhancement of its technological and R&D

competitiveness. At the same time, we will promote the Uzbekistan

office to a sales subsidiary to make it the base for making forays into

CIS markets.

Entry into ASEAN Advancement into

ASEAN markets:

securing a foothold in the ASEAN market with the representative office in Vietnam


In 2017, Yuhan Corporation’s overseas operations enjoyed continued demand for con-

tract manufacturing as multinational pharmaceutical conglomerates kept cutting costs

and new drug R&D competition intensified among small and medium-sized pharmaceu-

tical companies. In spite of the favorable market conditions, competition is getting fiercer

each year in the CMO market itself as competitors from China and India are upgrading

product quality and high-tech competitors from the U.S. and the EU are engaging in

large-volume strategies.

In meeting these challenges, Yuhan Corporation began fortifying the product quality last

year while enhancing its competitiveness to meet global standards such as the cGMP

(current Good Manufacturing Practice) and SH&E (Safety, Health & Environment) and

solidifying its trust-based relations with client companies.

2017 in Review

Yuhan Corporation focused on building its trust-based relations with clients in pursuit

of a competitive edge in today’s tough market environment. While maintaining ongoing

projects, we continued developing new projects to secure sustainable growth engines.

Furthermore, new clients helped us diversify our revenue structure. In addition, Yuhan

Chemicals’ second plant in Hwaseong successfully passed the U.S. FDA’s cGMP inspec-

tion, proof of its globally competent quality and production capabilities.

In 2017, overseas operation sales grew by 5.2 percent from the previous year to reach

KRW 265.9 billion, rendering us the prestigious USD 200 Million Export Tower prize by

the Korean government. Following the successful opening of the representative office

in Uzbekistan in 2016, we launched another representative office in Vietnam in 2017,

which will begin a feasibility test for a local subsidiary as a foothold in ASEAN markets.

USFDA cGMP

USFDA cGMP Inspection:

USFDA conducted the cGMP inspection on the production line at Yuhan Chemcials’ No. 2 plant in Hwaseong

2,65

9

1,94

32,

526

2015

2016

2017


+5.2% YoY Change

Overseas sales grew by 5.2 percent to reach KRW 265.9 billion in 2017 thanks to the operation of Yuhan Chemicals’ second plant and increased exports of new product items.

Overseas Business — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Overseas Business

4948

Healthcare & Consumer

Products Business


At Yuhan Corporation, we care about the health of our

customers and the environment, a fact that is evidenced

by the top-quality household items we make. Through the

Household Product business, we contribute to the promo-

tion of the nation’s health, while the Animal Health Care

(AHC) business, focuses on livestock and aquatic animal

medicine as well as pet food. The flagship products of

this sector include the chloride bleach Yuhanrox, the bak-

ing soda-based Arm & Hammer brand, and the pesticide

brand Happy Home.

In 2017, we continued expanding our market share of

our mainstay products like Yuhanrox and toothbrushes

and toothpastes. Most of all, the new products market-

ed last year—pesticide Happy Home and bleacher Yuhan

Gen—each sold more than KRW 10 billion, successfully es-

tablishing themselves within the market. Yuhan's share in

the household items market achieved a high growth rate

of 14.8 percent in 2017. At the same time, the successful

launch of a new product targeting the fast-growing pet

goods market—100% natural ingredient dental gum for

pet dogs called Whimzees—is expected to grow in the

market.

HEALTHCARE & CONSUMER PRODUCTS BUSINESS

Household items

DetergentsBleaches PesticidesOral care products

Aquatic animal medicineVeterinary drugs Pet food

AHC(Animal Healthcare)

Healthcare & Consumer Products Business — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Healthcare & Consumer Products Business

116.1billionKRWHealthcare & consumer products business sales growth of 13.7% over the previous year

Yuhanrox’s market share in 2017

75Household items sales growth over the previous year

14.8% %

5150

2015

2016

2017

1,16

1

892

1,02

2


+13.7% YoY Change

2018 Outlook

In 2018, the retail business is going through a paradigm shift with con-

sumer purchase patterns and platforms towards artificial intelligences

and big data analysis. In coping with this sea change, we are preparing

to swiftly research and deal with the changing purchase patterns of con-

sumers in pursuit of new markets. The household items business predicts

a shrink in the market size due to the overall low-growth trend, but we

still set our sales goals at KRW 121.8 billion. We will attain this goal

by expanding our items category of Happy Home brand and increasing

the market share of Yuhan Gen. We also plan channel expansions into

online and home shopping in 2018. While constantly introducing cus-

tomer-oriented new products to markets, we will concentrate on sales

growth through sales channel diversification and different product of-

ferings by store.

Although there are lingering uncertainties observed in the AHC mar-

ket, such as the rising prices of APIs for vitamins and antibiotics, we

still see more growth potential in the pet goods market. In 2018, we

expect the newly launched herb-based growth formula Delacon and re-

covering poultry industry to prop up the sales performance together.

Also, an aquatic vaccine for flatfish will debut on the market in 2018.

Furthermore, Whimzees, a natural ingredient dental gum for pet dogs

that we marketed last year, is also expected to establish itself in the

market, thereby contributing to sales growth, and the overall Wellness

animal feed products are expected to grow on the back of a booming

pet product market.


In the household items market, safety-sensitive issues remained an im-

portant agendum throughout 2017. In fact, the higher the consumer

aversion against chemical products, the higher social interest in green

products. Social concerns and regulations on chemical products grew

stronger from both the government and private sectors. Against this

backdrop, Yuhan’s healthcare & consumer product business stepped up

its marketing and promotion of Yuhan Gen, while bolstering its green

product line-ups in detergents, specifically the Arm & Hammer brand,

which earned an excellent reception in the market.

In the AHC business, animal feed plant channels suffered a decrease

in sales as the number of chickens plummeted in poultry farms, which

were swept by the deadly avian influenza (AI) that began at the end

of 2016. Despite the prolonged recession, the pet market continued

growing in Korea, feeding consumer needs for eco-friendly and natural

feeds and products for their pets. Seizing the growth potential of the

pet goods market, Yuhan Corporation launched the natural ingredient

dental gum for pet dogs called Whimzees in 2017.

2017 in Review

Even amid prolonged sagging consumption, the household items busi-

ness was able to record outstanding performance results in key products

through differentiated marketing strategies catering to customer needs.

In 2017, its sales rose by 14.8 percent from the previous year. Yuhanrox

continued to command the largest share of the bleaches market, while

other products like toothpastes and toothbrushes continued to grow

at the same time. In particular, new products like the pesticide Happy

Home and the bleach Yuhan Gen became KRW 10 billion sellers in their

second year. Their combined sales stood at KRW 70 billion in the cut-

throat-competition distribution market, with Yuhanrox selling KRW 59.1

billion and Happy Home selling KRW 10.8 billion.

In the AHC market, Yuhan Corporation enjoyed a 6.3 percent year-on-

year growth in sales at KRW 13.8 billion in 2017. Its operating profit

stood at KRW 1.5 billion. Furthermore, the operating sales ratio remained

in double digits for a sixth straight year, 10.8 percent, in 2017. Despite

the aftermath of the devastating bird flu sweep, our sales of herb-based

growth formula Delacon maintained the status quo in 2017, while pet

food sales surged by 60 percent over the previous year, boosting ex-

pectations for high growth in the pet product market. In meeting the

high market demand for eco-friendly and natural ingredient products,

we marketed herb-based growth formula for poultry called BioStrong

510 and successfully launched the 100% natural ingredient dental gum

for pet dogs called Whimzees in 2017, solidifying our market position.

10.8billionKRW

Happy Home sales in 2017

2017 Top Selling Product

Whimzees:

a 100% natural dental gum for pet dogs using six natural ingre-dients

2017 New Product

Happy Home:

Happy Home achieved rapid growth to become a KRW 10 billion seller brand in only two years on the market.

Healthcare & Consumer Products Business — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Healthcare & Consumer Products Business

Sales grew by 13.7% from KRW 102.2 billion in 2016 to KRW 116.1 billion in 2017.

5352

Research & Development


Boasting the largest R&D facilities (with a total floor space

of 23,700m2) in Korea’s pharmaceutical industry, Yuhan

R&D Institute leads company-wide R&D efforts for break-

through therapies, incrementally-modified drugs (IMDs)

and active pharmaceutical ingredient (API) research. In

2017, we invested 103.3 billion KRW in R&D to reinforce

our R&D competencies as a future growth driver, and in-

creased our R&D investments. In addition to our in-house

research competency-building efforts, we have also pro-

moted the Open Innovation initiative to expand R&D

partnerships with international clients to develop innova-

tive and differentiated global therapy breakthroughs. Yu-

han Corporation will continue building on its foundation

for future growth through differentiated new drug devel-

opment, improved in-licensing activities, expanded new

drug pipelines and R&D competency, and cutting-edge

systems. Our strategic R&D network-building will contin-

ue in its pursuit of joint R&D projects with strategic in-

vestments in prospective ventures and academic efforts at

home and abroad. We will continue to strive and grow

into a leading hub for medical R&D.

RESEARCH & DEVELOPMENT

Active Pharmaceutical Ingredients (APIs)

Breakthrough TherapiesIncrementally Modified Drugs

(IMDs)

Yuhan R&D Institute

KRW

189 patents in Korea and 432 patents internationally as of the end of 2017

621

103.7billionKRW

2017 R&D investment expenses- upKRW 17.2 billion from the previous year and 7 percent of overall sales

Patent filingsResearch personnel at the Yuhan R&D Institute as of 2017

267Researchers

Research & Development — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Research & Development

5554

2017 in Review

Clinical Trial Pipeline Research Results

Our third-generation therapy for the treatment of non-small cell lung cancer (YH25448)

showed outstanding efficacy in phase I clinical trials. It was also confirmed to have a

positive effect on brain metastasis in lung cancer patients harboring specific genetic mu-

tations and is poised to complete its phase II clinical trials by the end of 2018. In February

2018, Yuhan’s subsidiary, ImmuneOncia, obtained approval from the Ministry of Food

and Drug Safety for its phase I clinical trials focusing on the cancer immunotherapeutic

candidate IMC-001, the first immunotherapy to win approval for clinical trials in Korea.

The phase I clinical trials are underway aiming at its completion in the early 2019. In

addition, we have filed for final approval of our IMD combining hyperlipidemia and di-

abetes treatments (YH14755), hyperlipidemia and hypertension treatments (YH1701),

and a generic version of Dexilant (dexlansoprazole; YHP1606). We are also conducting

phase III clinical trials with YHP1604 for hyperlipidemia patients suffering from hyper-

tension. We have continued to pursue joint development and joint ventures as part of

our Open Innovation Strategy to expand our R&D pipeline since 2015. As a result, our

breakthrough therapies pipeline has grown to twice the number of assets, from 9 in

2015, to 18 in 2018.

R&D INVESTMENT EXPENSES (KRW 100 million)

1,03

7

726

865

Up 19.9% in R&D investments from 2016

+19.9% YoY Change

2017 New Product

Nasacare Nasal Spray Sol. (Jan. 2017):

A generic copy of Korea MSD’s rhinitis treatment Nasonex with improved spray sensuality compared to the original

R&D and Investment Strategies

Global Breakthrough Therapeutic R&D

As R&D technical competencies play a pivotal role in breakthrough therapeutic R&D ef-

forts, Yuhan Corporation is focusing on enhancing efficiency in the evaluation of new

drug candidates, techniques, and research organizations to enhance its capacity to meet

world-leading standards. We are also developing global R&D strategies for new drug

pipelines to improve the success rate of new drug candidates. In parallel, we will effi-

ciently distribute R&D resources to develop detailed research strategies to improve licens-

ing opportunities for our new drug candidates internationally. The company has created

a new drug R&D network and trust-based relationships with bio-ventures, universities

and public R&D institutes to reinforce our Open Innovation Initiative—the key driver of

our new drug R&D strategy. All strategic investments and technical acquisitions are made

through this network and our partnerships. We will also continue to identify competent

research institutes with prospective new therapeutic technologies at home and abroad,

and build better partnerships to generate tangible R&D outcomes into the foreseeable

future.

New Drug R&D

Yuhan’s IMD R&D strategies are focused on combinations with enhanced co-administra-

tion efficacy and consumer convenience, new dose formats with improved administra-

tion attributes, and enhanced formulations with lower adverse effects. These efforts are

aimed at delivering a mid- and long-term product R&D portfolio to develop and market

new products in a timely manner. While reinforcing our technical know-how in dissolu-

tion speed control, solubilization and multi-layering, we will continue to seek alliances

with external experts to secure new technologies to develop our own unique platform

technologies. In the generic product R&D sector, we will move beyond simply creating

generic versions and develop differentiated products with improved convenience and

productivity. In the OTC sector, we will manufacture consumer-friendly drugs and designs

in tandem with existing product renewals.

API R&D

In our API R&D sector, we will bolster our competencies in developing early-stage (prior

to phase II clinical trials) processes in harmony with late-stage (post-phase II clinical trials)

process optimization competency. Our ultimate goal is to create a globally competent

client-led API R&D organization that covers from the early stages of R&D to the com-

mercialization stage. To that end, we will develop R&D systems to secure continuous

processes and establish production technologies that are differentiated from the existing

batch production processes. Additionally, we will fully commit to the Open Innovation

initiative to develop API production and new synthesis technologies for Korean ventures

and academic institutes while promoting the adoption and joint research of prospective

technologies.

2015

2016

2017

API Sector Performance Results

Yuhan R&D Institute carries out research for production process de-

velopment with new therapeutic candidates for global clients as part

of its contract manufacturing services, as well as R&D activities for

Yuhan’s finished products and APIs for exports. In 2017, the Insti-

tute completed a total of 11 CMO initiatives, with two successfully

completing process verification batch production. This succeeded in

creating new technical know-how to Yuhan Chemical enabling the

supply of APIs to global pharmaceutical companies. As part of the

company’s efforts to increase the development of in-house products,

the institute also conducts process development research for a num-

ber of generic drug ingredients. Furthermore, the mass production

Process Research Institute (reactive process room II) was expanded

to add state-of-the-art synthesis equipment including a 150L-class

Hastelloy reactor, filter and vacuum dryer. The addition of optimal

facilities for mass production process research and batch production

allows for the safe and efficient development of mass production

processes.


5756

2017 New Product

Nasacare Nasal Spray Sol.

(Jan. 2017): A generic copy of Korea MSD’s rhinitis treatment Naso-nex with improved spray sensuality compared to the original

YHC2101: A cancer immunotherapy immune checkpoint inhibitor

YHC2101 is a cancer immunotherapy classified as an immune checkpoint inhibitor—a bio-

logical that removes checkpoints in the immune system to help the body attack cancer cells.

Its maximum efficacy was determined by generating synergistic outcomes with co-adminis-

tration with another immune checkpoint inhibitor, an anti-PD-L1 antibody, in animal tests.

Preclinical trials are planned in the near future.

IMC-001: A bio-immunotherapy to fight cancer

IMC-001 is one of Yuhan’s best-in-class strategic therapies. It is an anti-PD-L1 (pro-

grammed death-ligand 1) antibody that inhibits checkpoint molecules enabling immune

cells to consume cancerous cells. With phase I clinical trials in cancer patients slated for

the first quarter of 2018, IMC-001 has become the first immunotherapy to fight cancer

and win approval for clinical trials in Korea.

YH25724: A novel treatment for non-alcoholic steatohepatitis

YH25724 is a recombinant protein that elicits dual efficacy via GLP-1 and FGF21 ago-

nism. It is a new therapeutic candidate for the treatment of non-alcoholic steatohepatitis

(NASH) and a wide spectrum of other metabolic diseases, including type 2 diabetes and

obesity. With nonclinical studies completed, improved outcomes for NASH have been ob-

served for endpoints including fatty liver, inflammatory liver and liver fibrosis, confirming

the relevance for diabetes and obesity. The asset is currently undergoing a process study

for mass production of free medical treatment packets for clinical trials, which is slated

for the latter half of 2019.

YHD1119: An IMD for diabetic neuropathy and postherpetic neuralgia

YHD1119 is a pregabalin IMD that uses Yuhan Corporation’s unique technology for gas-

tric retention to improve patient convenience and compliance. Pregabalin is a medication

for treating neuropathic pain with improved patient convenience and compliance as it

enables a single daily administration, while the conventional drug works only when ad-

ministered twice daily. It is currently in phase III clinical trials in patients suffering from

co-existing diabetic neuropathy and post herpetic neuralgia. Yuhan plans to receive final

approval for this asset in the second half of 2018 and launch marketing activities in the

first half of 2019.

YH14755: A treatment for co-existing hyperlipidemia and diabetes

YH14755 is an IMD combining hyperlipidemia and diabetes treatments suitable for single

daily administration. Bioequivalence with co-administration of the two treatments has

been confirmed in phase I clinical trials and the drug has successfully completed phase III

clinical trials in patients with both diabetes and hyperlipidemia. We filed for final approv-

al of this asset in late 2017 and plan on marketing it in the latter half of 2018.

YHP1604: A combination drug for co-existing hypertension and hyperlipidemia

YHP1604 is a tri-layer combination IMD for the simultaneous treatment of hypertension and

hyperlipidemia. It is being developed to improve convenience and compliance for patients.

phase I clinical trials are currently underway to confirm bioequivalence between a low dose

of YH1604 and co-treatment with the individual agents. Phase III clinical trials are also un-

derway in hyperlipidemia patients with uncontrolled blood pressure.

YHP1701: A combination drug for co-existing hypertension and hyperlipidemia

YHP1701 is a double-layer combination IMD for the simultaneous treatment of hyper-

tension and hyperlipidemia. This is the first of its kind under development in Korea. In

comparison to existing combinations, it is expected to have increased efficacy but with

reduced adverse effects. Phase III clinical trials has completed on idiopathic hypertension

patients suffering dyslipidemia to confirm its superiority to treatment with individual

agents.

Pipelines

YH25448: A next-generation targeted anti-cancer drug

YH25448 is a third-generation epidermal growth factor receptor tyrosine kinase inhibitor

(EGFR-TKI) and a new therapeutic candidate for the treatment of non-small cell lung can-

cers that are resistant to first- and second-generation drugs. Over the past decade, the

development of targeted anti-cancer drugs has improved the lung cancer survival rate

by more than double. However, repetitive dosage of first-generation EGFR TK inhibitors

associated with the T790M genetic mutation erodes the remedial value. A reported 50%

of lung cancer patients develop brain cancer, but existing medications are reported to

have either no or limited effects on brain metastases arising from lung cancer. YH25448

has demonstrated excellent efficacy in the results of a phase I clinical trial in lung cancer

patients harboring the T790M mutation when compared to an active comparator. Fur-

thermore, the study results showed that even escalated doses resulted in few side effects

including skin rash and diarrhea. The drug is aiming at the completion of phase II clinical

trials by the end of the year.

YH25448

YH12852

YHC1105

YH25248

YHC1104

YHC1103

YHC1102

YHC1108

YHC1107

YHC1112

YHC1113

YHC1114

YH25724

YH24931

YHC2101

YHC2106

YHC2109

YHC2110

Synthetic

new therapies

Biological

new therapies

BREAKTHROUGH THERAPIES

Tumor (lung cancer)

Diarrhea, post-surgery intestinal obstruction

Asthma

Tumor

Tumor

Tumor

Non-alcoholic steatohepatitis


Tumor

Tumor

Keloid

Tumor


Tumor

Tumor

Tumor

Tumor

Obesity

Hyperlipidemia/Hypertension

Diabetes/Hyperlipidemia

Hyperlipidemia/Hypertension

Hypertension

Peri-implant mucositis

Hyperlipidemia/Antithrombotic

Diabetic neuropathy

Phase II Clinical Trials

Phase III Clinical Trials

Filing for ApprovalPreclinical Phase I Clinical Trials

Discovery Lead Compound

Candidate

* as of May 2018

YHP1701

YH14755

YHP1604

YH22162

YH26153

YH26136

YHD1119

Compounds

New

Formulation

Phase II Clinical Trials

Phase III Clinical Trials

Filing for ApprovalPreclinical Phase I Clinical Trials

Discovery Lead Compound

Candidate

INCREMENTALLY MODIFIED DRUGS


5958

Production 2017 KEY ACHIEVEMENTS

LiquidsTablets Syrups SuspensionsCapsulesInjections

Ochang Plant

Dedicated to producing pharmaceuticals that people can

entrust their health problems with, Yuhan Corporation

operates pharmaceutical and medical production sys-

tems and automated logistics systems that meet the latest

GMP-standards. Its production line is capable of produc-

ing two billion tabs annually and is differentiated by the

eight dosage forms, including capsules, injections, liquids

and syrups. Placing safety at the top of our priority list

at all our production sites, we have constantly strived

to prevent occupational accidents since our inception.

As a result, Yuhan Corporation became the first Korean

pharmaceutical company to achieve the 1.2 million-hour

accident-free goal. This means that the company has re-

mained accident-free for 18 years in a row. Furthermore,

Yuhan Corporation’s Manufacture Center maintains air-

tight quality control through consistent innovation drives

to manufacture trustworthy pharmaceuticals and to con-

tribute to the nation’s health.

PRODUCTION

1.85billion tabletsTablet production volume

Ampule production volume

43Syrup production volume

2.3million litersmillion ampules

Production — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Production

60

2018 Outlook

The 2018 outlook for manufacturing businesses does not look good,

as regulations changed to shorten the legal working hours. In deal-

ing with the challenging market environment, Yuhan’s Manufacture

Center will transform into a swifter and more flexible organization

while remaining dedicated to its basic mission of delivering quality

products on time and at affordable costs.

To that end, we have developed two key plans as follows: First, we

will expand the scope of our quality control to cover the entire value

chain from the API and ingredient suppliers to our wholesale phar-

maceutical clients. In order to meet ever-demanding consumer needs

for quality products, we will continue analyzing consumer complaints

to improve our manufacturing processes. We will also continue en-

hancing our manufacturing and quality technological capabilities by

participating in the Ministry of Food and Drug Safety’s Medical Qual-

ity by Design (QbD) initiative.

Second, we will strive to timely deliver pharmaceuticals to end-users.

In a bid to address the reduced working hours under the revised

Labor Law, we will train multiplayers to decentralize the duties and

roles while adopting unmanned production processes to simultane-

ously increase production volume and enhance productivity. At the

same time, we will stock seasonal products during low seasons to

timely respond to heightened sales volume in peak seasons.

2017 in Review

Backed by the company’s overall sales growth in 2017, the Manufacture Center achieved

13.1 percent year-on-year growth to reach KRW 435.6 billion in value. The growth was

led by the KRW 12.5 billion growth in Rosuvamibe tablets (KRW 24.1 billion), the KRW

6.6 billion growth in Beecom-C Active (new product), and the KRW 4.5 billion growth

in Meropen Injections (KRW 32.7 billion). In terms of production volume, a total of 1.85

billion tablets, 43 million ampoules and 2.3 million liters of syrup were manufactured in

2017. Following our acquisition of Yuhan Medica’s production site, we remodeled the

plant, equipping it with vitamin production facilities and health supplement production

facilities. We expect these new additions will contribute to our increased product portfo-

lio. Moreover, the acquisition of the DMK landsite, which spans 15,418m2 in size near the

plant, have rendered us the facilities and foundation for manufacturing new products as

future growth engines. It is also expected to effectively address the shortage in production

capacity to meet the exploding sales volume.

On top of that, we have implemented on-site inspections on our suppliers of APIs and

ingredients to improve working conditions and enhance production quality control on

our supply chain, which we believe will contribute to the advanced quality of Yuhan’s

products.

2017 Production

Amount

61

+13.1% YoY Change

Ochang Plant

Completed in 2006, the Ochang plant is equipped with an automated handling system.

Its industry’s highest level of automated KGMP production facilities roll out a wide ar-

ray of medicines—from tablets to capsules—in different dosage quantities through an

automated logistics system. The world-leading production facilities for making quality

medicines includes a fluid bed granulator, tablet press machine and a tablet inspector.

Innovation Programs

Located in Ochang Technopolis, Yuhan's Manufacture Center is striving to achieve great-

er efficiency as it upgrades the quality of medicines by introducing the innovative Six

Sigma and TRIZ programs to improve its work processes.

Green Management & Sustainability Management

Committed to green management, Yuhan Corporation strives to reduce its emission of

pollutants and is constantly developing new eco-friendly products. In line with the cor-

porate policy, the Manufacture Center has put into place an integrated environmental

management system (ISO 14001, KOSHA/OHSAS18001) and engages in various activities

to ensure eco-friendly production and environmental protection. Furthermore, its com-

mitment to volunteerism and community service is only part of its overall efforts to carry

out genuine CSR activities.

In 2017, Medical production valuegrew by 13.1 percent from 2016 toreach KRW 435.6 billion.

4,35

6

3,13

83,

853

2015

2016

2017

PRODUCTION VALUE (KRW 100 million)

Production — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Production

2017 production value amounting to KRW 435.6 billion in coping with the

company’s sales growth

billionKRW 435.6


YUHAN

PRODUCT PORTFOLIO

Yuhan Corporation is proud to contribute to the health and

quality of life in Korea with its extensive product lineup, rang-

ing from quality ETC and OTC drugs that contribute to the

nation’s health to related products like household chemicals,

animal pharmaceuticals, nutritious supplements and cosmetics.

For example, Viread is for a hepatitis B treatment with the mar-

ket-leading share of prescription and ETC drug sales. Tragenta is

for a type 2 diabetes treatment and Twynsta is for our flagship

hypertension treatment product. And Atorva and Rosuvamibe

represent our statin lineup of hyperlipidemia treatments— and

Duowell Tab, used to deal with hypertension and hyperlipid-

emia. With OTC drugs, there are Beecom-C, Korea’s favored vi-

tamin C product, Antiphlamine, the nation’s long-time favored

anti-inflammatory drug, and Megatrue, a high-content vitamin

pill that has become a necessity for people today.

All these products are constantly growing in sales as our flag-

ship products in their respective areas through our differentiat-

ed advertisement strategies.

At the same time, Yuhan Corporation possesses a compre-

hensive product lineup in household items that contribute to

the country’s health promotion and livestock & aquatic phar-

maceuticals and pet food products. Our signature products in

house-hold items include (1) Yuhanrox, a necessity for healthy

and clean life conditions, (2) Yuhan Gen, the No. 1 brand of

oxygen-based bleach on the market, (3) Happy Home, a total

pesticide brand that has become a market leader in household

items, and (4) Arm & Hammer, a baking soda-based natural

brand. These are our flagship eco-friendly products that accom-

modate growing consumer needs for non-toxic goods. Also in

the animal food business, we have Wellness—a natural animal

food brand that is popular in premium pet food market.

62 YUHAN ANNUAL REPORT 2017-2018 — Yuhan Product Portfolio

PHARMACEUTICALS

HEALTHCARE &

CONSUMER PRODUCTS

Message From The CEO — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Message From The CEO

PHARMACEUTICALS

Antiphlamine

Beecom-C

Megatrue

Mercilon

1. ETC Drugs 2. OTC Drugs

1. Household Goods

HEALTHCARE & CONSUMER PRODUCTS

2. AHC

Viread

Atorva

Yuhanrox Arm & Hammer

Trajenta and Trajenta Duo

Rosuvamibe

Yuhan Gen Wellness

Twynsta

Duowell

No. 1 Prescription Market Share and No. 1 in Sales of ETC

Drugs: Through a strategic partnership with Gilead Science

Korea, Yuhan Corporation successfully established Viread as a

primary treatment for chronic hepatitis B virus (HBV), demon-

strating sustainable growth in the process.

A Decades-old Household Brand from a Century-old

Company: Antiphlamine was Yuhan’s first in-house developed

anti-inflammatory drug and has been a household medicine

for all Koreans for the past 84 years.

The Unrivaled Market Leader for Type 2 Diabetes Treat-

ment: The diabetes treatment products Trajenta and Trajen-

ta Duo have been licensed in via strategic partnership with

Boehringer Ingelheim. These two products have grown into

Yuhan's mega brands selling more than KRW 100 billion on

the strengths of being highly effective in lowering blood sugar

levels.

A High Vitamin Content: Megatrue comes in various types,

including Megatrue for business people, Megatrue Gold for

middle-aged people, Megatrue Focus for teenagers and those

preparing for important exams, and Megatrue Active for pa-

tients and convalescents. Its high content, available in varied

doses according to consumer needs, helps consumers quickly

recover from fatigue.

A Market Leader in Hypertension Treatment: Twynsta is a

combination of Telmisartan and Amlodipine. Since its launch in

strategic marketing alliance with Boehringer Ingelheim years

agao, it has sustained a high growth rate in the hypertension

treatment market. Its market-leading position still remains un-

daunted.

Happy Home Delacon

Korea’s Long-time Favorite Cleaner: First introduced to Ko-

rean consumers in 1975, Yuhanrox has been contributing to a

healthy and clean living condition for Koreans since then. It has

consistently maintained the highest sales record in the chloride

bleach market for the past 42 years.

Original Baking Soda Brand: Arm & Hammer has launched

a variety of baking soda-based natural-ingredient eco-friendly

products, including toothpastes, abstergents, and deodorizers.

In particular, the brand applies a stricter food additives level

to all its domestically produced baking soda-based products in

order to make its products safer and healthier to consumers.

An Emerging Leader of the Oxygen-based Bleach Mar-

ket: Yuhan Gen is a high-quality oxygen-based bleach line that

takes advantage of the excellent technology of the U.S. mak-

er Clorox. It has emerged as the leader of the oxygen-based

bleach market in its second year through effective marketing

and rising consumer awareness since its launch in 2016.

A Premium Pet Food Brand: Introduced to the U.S. market

in 1926, Wellness is a premium natural pet food brand. As it

remains focused on the health of pets, Wellness offers natural

pet food products perfectly suited to the most selective pet

palates.

Yuhan’s New Dark Horse in Household Chemical Brands:

Launched in 2016 as a pesticide brand, Happy Home has made

a remarkable accomplishment, emerging as a KRW 10 billion

seller in only its second year on the market. In 2018, it market-

ed new products like air traps for capturing insects and disin-

fectants for external application to grow beyond a pesticide

brand and become a total healthcare brand.

Eco-friendly Animal Feed Additives: Yuhan Corporation

imports phytogenic feed additives from Austria’s Delacon to

provide natural herbal extract-based animal feed additives for

eco-friendly and antibiotic-free breeding in Korea. Its flagship

products, Presta F and BIOSTRONG®510, are performance ad-

ditives for animal feeds of which the EU’s Food Safety Agency

has certified safety and efficacy.

A Market Dominant Power in Hyperlipidemia Treatment:

On the back of powerful marketing and early entry, Atorva

(Lipitor’s generic version of the drug) had a powerful impact

on the KRW 800 billion hyperlipidemia market. It is one of Yu-

han’s leading statin products. It is expected to continue sales

growth to dominate the market share of the same generic

components.

A High-Growth Rate Hyperlipidemia Treatment: A com-

bination of Rosuvastatin and Ezetimibe, it is emerging in the

hyperlipidemia treatment market with a sales growth rate of

180.6 percent in 2017.

Korea’s Favorite Vitamin Supplement: Beecom-C entered

the market in 1963 and the advanced version, Beecom B+C

combination was introduced in 1987, which has been the na-

tion’s favorite vitamin supplement. With time, its line-up has

grown by adding Beecom-C F, Beecom-C ACE, and Beecom-C

Eve series. The latest version is Beecom C Active, which has a

higher absorptivity of the active vitamin, helping people quickly

recover from fatigue.

In-house Developed World’s First Combination of Hy-

pertensive/Hyperlipidemia Treatments: Launched in 2015,

Duowell is an in-house developed drug that is a combination

of an antihypertensive component, telmisartan, and a hyper-

lipidemia component, rosuvastatin. It is expected to lead the

growth of our in-house developed medicines sector in the

future.

Korea’s bestselling contraceptive pill: Introduced in 1988,

Mercilon Tab. is Korea’s No. 1 ultra-low dose contraceptive pill

in terms of sales. The oral contraceptive pill with 1/3 content of

the female hormone estrogen is women’s favorite pill in Korea

because it is mild and easy to intake.

62 YUHAN ANNUAL REPORT 2017-2018 — Yuhan Product Portfolio

YUHAN

PRODUCT PORTFOLIO

Yuhan Corporation is proud to contribute to the health and

quality of life in Korea with its extensive product lineup, rang-

ing from quality ETC and OTC drugs that contribute to the

nation’s health to related products like household chemicals,

animal pharmaceuticals, nutritious supplements and cosmetics.

For example, Viread is for a hepatitis B treatment with the mar-

ket-leading share of prescription and ETC drug sales. Tragenta is

for a type 2 diabetes treatment and Twynsta is for our flagship

hypertension treatment product. And Atorva and Rosuvamibe

represent our statin lineup of hyperlipidemia treatments— and

Duowell Tab, used to deal with hypertension and hyperlipid-

emia. With OTC drugs, there are Beecom-C, Korea’s favored vi-

tamin C product, Antiphlamine, the nation’s long-time favored

anti-inflammatory drug, and Megatrue, a high-content vitamin

pill that has become a necessity for people today.

All these products are constantly growing in sales as our flag-

ship products in their respective areas through our differentiat-

ed advertisement strategies.

At the same time, Yuhan Corporation possesses a compre-

hensive product lineup in household items that contribute to

the country’s health promotion and livestock & aquatic phar-

maceuticals and pet food products. Our signature products in

house-hold items include (1) Yuhanrox, a necessity for healthy

and clean life conditions, (2) Yuhan Gen, the No. 1 brand of

oxygen-based bleach on the market, (3) Happy Home, a total

pesticide brand that has become a market leader in household

items, and (4) Arm & Hammer, a baking soda-based natural

brand. These are our flagship eco-friendly products that accom-

modate growing consumer needs for non-toxic goods. Also in

the animal food business, we have Wellness—a natural animal

food brand that is popular in premium pet food market.


SINCERE INTEGRITY

OurResponsibilities

2Yuhan's founding mission to develop

the very best medicines to contribute

to public health has made the

company one of the most admired

company in Korea today. Our practice

of corporate social responsibilities

through non-profit organizations

such as Yuhan Foundation and Yuhan

School will continue to be part of our

transparent mechanism for enabling

the sustainable development of

society and protecting the environment

in the days to come.

Corporate Social Responsibility

Yuhan Corporation creates new future-oriented so-cial values through its social contribution activities and employee volunteerism. In particular, we creat-ed a CSR Team in 2017, systemizing our social contri-bution in line with the foundation philosophy and corporate vision. At the same time, we are weaving volunteerism into our corporate culture of reward-ing people who contribute to society.

Establishment of a CSR Team

2017 Major Achievements

2017 social contribution expenses

15billionKRW

National Health

Yuhan Corporation lends its business acumen to society

to contribute to promoting the physical, mental and social

health of the nation.

Academic & Medical Support

Dedicated to the promotion of people’s health and medical

development, Yuhan Corporation supports a number of ac-

ademic research activities by research institutes and individ-

uals, and supports the development of national healthcare

through its signature academic awards called: the Yuhan

Prize for Medicine; and the Yuhan Prize for Tuberculosis and

Respiratory Disease Research. In addition, we provide med-

ical supplies to medically underprivileged people at home

and abroad. In 2017, we donated medical supplies to 303

healthcare centers and 600 households of low-income fam-

ilies and men of national merit both in Korea and overseas.

Health Promotion in Local Communities

Yuhan Corporation engages in diverse healthcare support

programs in local communities. On top of quarterly educa-

tional sessions for local residents on dental healthcare, we

distribute nutritional supplements to the local low-income

elderly people. We also distribute free healthcare newslet-

ters titled Healthcare Buddies to residents in underprivileged

areas.

Blood Drives by Yuhan Employees

Yuhan Corporation’s employees have participated in blood

drives twice a year since 2008. In 2017, 268 employees

joined the cause from our headquarters, research centers,

and plants.

69

National Healthcare

• Academic & Medical support• Employee blood drives• Health promotion in local

communities

A Happier Society

• Supporting the underprivileged• Addressing local issues• Protecting local environments

Hope for a Better Future

• Educational support for local children

• Mentoring at home for children

Social Contribution Activities

Following Dr. Ilhan New’s philosophy that corporate

profits should be given back to society because it

grows the company, Yuhan Corporation shares its

corporate gains with everyone. In fact, we have an

established system of returning corporate profits to

society. Yuhan’s corporate governance is fair and

unique, which includes Yuhan Foundation and Yu-

han School, both a non-profit organization, as the

two largest shareholders. This was made possible

because Dr. New donated all his shares in Yuhan Cor-

poration to these two public organizations. Since

then, the company has consistently maintained a

high dividend payout policy in cash and bonus is-

sues of stocks which fund these foundations’ good

causes.

23.1%* As of the end of 2017

The Yuhan Foundation: Yuhan Corporation’s Largest Shareholder

YUHAN CSR SYSTEM

• Public organizations as the largest shareholders

• Increased dividends enabling sustainable growth

• Yuhan Foundation & Yuhan School’s public cause campaigns funded by dividends

• Volunteer activities as part of social contribution projects

• Creation of the CSR Team (2017)• Social contribution under the themes

of health, community engagement and education

• Employee volunteer corps• Company-wide support of volunteer

activities• Various volunteer and donation

programs

Total Dividends Paid to Yuhan Foundation & Yuhan School (Unit: KRW billion)

Social Contribution Expenses (Unit: KRW billion)

1.3

1.5

1.5

2015

2016

2017

Volunteer Hours (Unit: hours)

1,215

1,840

3,712

2015

2016

2017

4.4

4.5

4.9

2015

2016

2017

Social Contributions


Volunteerism

Yuhan’s CSR System

68 Corporate Social Responsibility — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Yuhan’s CSR System

Volunteerism

A Happier Society

Yuhan Corporation strives to address local issues to ensure a

happier society for all.

Supporting the Underprivileged

Yuhan Corporation reaches out to the underprivileged, such

as elderly citizens living alone and the disabled, through a

number of support programs. From housing support pro-

grams such as home repair services and donation of hon-

eycomb briquette to seasonal activities like sharing kimchi

and chicken soup, as well as volunteer activities at homes

for children, we run a variety of programs customized to

specific needs in collaboration with local authorities.

Addressing Local Issues

Being able to effectively and timely address the issues of lo-

cal communities is also important to us. For instance, we put

yellow foot-shaped stickers on 11 crosswalks around three

elementary schools in Ochang in 2017 in order to prevent

school-zone accidents involving child victims. To share the

burden of natural disaster victims, we also donated emer-

gency supply kits to flood victims in Cheongju. Moreover,

we have built a social network for addressing local issues

with 17 entities, including the headquarters, plants and re-

search centers, as well as our partners.

Protecting the Local Environment

As part of our environmental protection campaigns, we

clean up trails of Gyeryongsan National Park and Yongdu

River on a regular basis under agreements with local author-

ities. We also carry out our role under the Voluntary Agree-

ment on restoring the water quality of Mihocheon Stream.

Hope for a Better Future

Yuhan employees contribute their talent and skills to instill

hope in the young minds of local underprivileged families

through various education and mentoring programs.

Educational Support to Local Children

Children are our future leaders. Therefore, we are responsi-

ble for helping them realize their potential. Yuhan employ-

ees regularly volunteer their time to give education sessions

to children at local centers for kids—two in Seoul and one in

Yongin—helping their home study initiatives and mentoring

them to fulfill their dreams.

Mentoring at Home for Children

Yuhan employees are mentoring children and teenagers at

local homes for children—two in Seoul and one in Yongin

through such programs as sports activities, gardening and

playing.

Participation

Yuhan Corporation’s special interest in corporate social re-

sponsibilities is put into practice by its employees’ active vol-

unteerism. We have many theme-based volunteer programs

involving not only employees but also their families. Further-

more, diverse CSR campaigns and donation campaigns in-

vite our employees to take part in the company’s volunteer-

ism initiatives as part of our corporate culture.

Practices

Yuhan Corporation supports employees’ long-term sustain-

able sharing activities through volunteer groups. The talent

donation volunteer groups and the company’s incubation

program promote the practical sharing of our talent and re-

sources with society.

Promotion

In order to help volunteers cultivate expertise, we offer sys-

tematic support such as education programs, commenda-

tions for outstanding performance, and overseas studying

programs to promote company-wide volunteerism.

7170

• Theme-based volunteer programs

• CSR campaigns

• Employee volunteer corps

• Volunteer corps incubating

• Building volunteer competencies

• Volunteer support programs

Participation Practices Promotion

Volunteer Activities

• Building a company-wide consensus and promoting a culture of sharing

• Offline education, employee gathering and annual surveys

• CSR Newsletter (monthly) and intranet bulletin board

Promoting a Culture of Sharing

At Yuhan Corporation, we have three principles of employee volunteerism: voluntariness, continuity and unconditionalness. The company sponsors the creation of volunteer group, partners with related organizations and plans through its incubating sys-tem. In order to help these clubs continue their ac-tivities, the company provides monitoring and cus-tomized support programs while helping volunteers build their competencies through these education programs.


Total Volunteer Hours

3,712 hours

Total Number of Volunteers

1,095 people

Volunteerism — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Corporate Social Responsibility

Progress and integrity have been the two core val-ues of Yuhan Corporation since its foundation. These two values constitute the basic principles of human resources development at Yuhan Corporation. In-spired by Dr. New’s high respect for humanity, Yuhan the creativity, enterprising spirit and passion of its talented employees, and they will set the direction for the corporate vision towards future growth. Its professional management system ensures fair oppor-tunities for all employees to aspire for the CEO posi-tion. Our transparent human resource management and development programs foster future leaders and experts in their respective job duties while mo-tivating them to achieve higher goals with generous employee benefit programs.

7372

New employees

Executives

Team Managers

1-grade

2-grade

3-grade

4-grade and below

Commoncourses

Leadership and management by job class

Common courses

Basic job functions· External expertise course

· Humanity program& product training

· Orientation for new employees

Common courses

VideoPhoneOnline

Outside cram schools

Executive workshops

Class-based workshops

CEO/Newly promoted executive

High-level policymaker courses by sector

Technical certification

course

· OJT by job function and department

In-house native-speaker

instructors

Team manager workshops

MBA courses

Job leader fostering course

Master/Doctor courses

Overseas

해외연수

Outsourced training at domestic training

institutions

Educational Program System

Personnel Management

As Dr. New said, “Those who work for the same company

share the same destiny through corporate activities.” At Yu-

han—and following the philosophy of Dr. Ilhan New—our

personnel management is based on a principle of respecting

others, a system in which the company is operated by em-

ployees, and its most important resources are the people

themselves. All of our management personnel are execu-

tives who were appointed through open recruitment. At Yu-

han, every employee can strive to the top of the company.

We also operate a fair and reasonable promotion system

that balances talent with seniority.

Human Resources Development Programs

At Yuhan Corporation, we strongly believe that sustainable

growth can be achieved at a company whose highly compe-

tent employees can realize their full potential. We operate

a range of HR development programs to nurture competent

leaders and provide lifelong learning in support of our em-

ployees’ self-realization. Our systemic curriculum programs

deal with leadership, management, job training, globaliza-

tion and organizational activation. This involves sending

our employees overseas or to other regions within Korea;

providing group training; online and mobile training; and in-

house and outside classes. These opportunities help our em-

ployees cultivate global competencies, as well as leadership

and expertise in their fields and develop an open and cre-

ative culture. As a result, Yuhan Corporation received gov-

ernment certification for its outstanding HRD performance

results in 2017. Going forward, we will continue to expand

educational opportunities and enhance the quality in line

with the corporate philosophy and values.

Employee Benefits

We believe that creating higher corporate value begins with

balancing work and life. Yuhan Corporation provides gener-

ous benefit programs for employees to improve their quality

of life and in turn improve their focus on work. The com-

pany makes annual contributions to the Employee Welfare

Fund to promote employee welfare benefits. We also reward

long-time service employees with commendations, sub-

scribe to a group injury insurance policy, run leisure facilities

for vacations and condominiums, health check-ups, family

affair allowance and leave, and corporate club activities.

In promotion of quality of life and practical benefits, we

encourage employees to take leaves when need be. Specif-

ically, we have a substitute worker system to facilitate em-

ployees to take parental leave and maternity leave without

any worry of their workload. As a result, the number of em-

ployees applying for parental leave is increasing each year.

Without a limit on the number of child beneficiaries, the

company subsidizes the tuitions for universities and medi-

cal/pharmaceutical graduate schools of employees’ children.

We also have an in-house childcare center as part of our

family friendly policy. In 2017, we also initiated the anony-

mous report bulletin board to listen to the candid opinions

of our employees concerning their welfare.

Fostering future leaders

Basic common programs

Corporate culture-building, humanity and culture programs

Job competency-building/job experts

By job class By job function Global Competency-building

Reinforcing global competencies

Employee Competency-BuildingCultivating Yuhan Value in Employees

Human Resource Development

The principle of respecting a humanistic & professional management system

Employee Benefit Programs

Employee Welfare Fund, corporate club

support programs, group injury insur-

ance coverage, birthday gifts,

commendations to long-time service

employees, health check-ups,

merit-based leave for retirees-to-be,

subsidies for those studying to attain

certifications

Employee Support

Working conditions check-ups,

musculoskeletal diseases prevent

programs, accessibility for the disabled,

smart office system, convenience

facilities

Working Conditions

Child scholarships, family affair subsidies,

encouragement of taking annual leave,

provision of funeral supplies, family

events, leisure facilities for vacations

Family Support

Paid menstrual leave and prenatal

check-up leave, dairy room, parking lots

reserved for pregnant women, uterine/

breast cancer check-ups, substitute work

for employees on parental leave and

maternity leave

Childcare Support

Human Resource Development — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Human Resource Development


No. of beneficiaries of the Yuhan Employee Children Scholarship

311students

Amount paid in to the Yuhan Employee Children Scholarship

1,474 KRW in millions

7574

Health, Safety & Environment

Yuhan Corporation has a team dedicated to the effi-cient operation of health, safety and environmental management under the professional health, safety and environmental management systems to ensure healthy and safe working conditions that also con-tribute to protecting the environment through its green management practices. Our worksites are certified with health and safety management sys-tems; KOSHA/OHSAS 18001; and the environmental management system, ISO14001. In August 2017, we became the first Korean pharmaceutical company to achieve for 13 times the accident-free goal of the in-dustry since 1999. Amounting to 13.7 million hours, it took us 18 years to attain that goal. This was the result of our consistent commitment to making our workplace safer.

Health and Safety Management System

Yuhan’s Ochang plant operates under the KOSHA/OHSAS

18001 Health and Safety Management Assessment Series.

We abide by all health and safety regulations at all our

worksites with our priority on employee safety, striving to

ensure safe working conditions. All worksites are estab-

lished with the process safety management (PSM) system

to prevent serious industrial accidents, such as fires and ex-

plosions in the normal course of handling harmful and haz-

ardous materials. We also maintain safe workplaces through

risk assessments on all our processes to timely identify and

improve risk factors. As a result, since our zero-accident

movement began in 1999, we became the first Korean

pharmaceuticals company to achieve 13 times the industry’s

target for accident-free duration in August 2017.

Environmental Management System

Yuhan Corporation’s Ochang plant has established an en-

vironmental management system (ISO14001) in pursuit of

its corporate social responsibility and sustainable business

as well as society. It allows us to balance our business activ-

ities with the environment under key management targets,

such as pollutant reductions, a clean production line, and

resource recycling. All departments mandate their own tar-

gets and improvement initiatives, and review their conformi-

ty to the company’s EMS and accomplishments compared to

preassigned targets. In addition, our employees are always

mindful of their carbon footprint in their daily duty fulfill-

ments to contribute to a low-carbon society. At the com-

pany level, we have an established system for building and

sharing greenhouse gas inventories at our worksites so that

we can cut down on our carbon emissions. These are only

a handful of examples of our practices to address climate

change and green growth management. Additionally, we

strive to address environmental risks at home and abroad

for higher stakeholder satisfaction.

Green Company Certification

Yuhan Corporation was certified as a Green Company from

the Ministry of Environment in 2009 for its environmental

management system. Going beyond the minimal environ-

mental approach to merely meet federal regulations, we run

self-checks on the environmental impact of our worksites

and devised improvement plans based on the results to

build an autonomous environmental management system.

We also keep pollutant emissions within 20 percent of le-

gal standards and minimize environmental risks through ex-

haustive monitoring and prior inspections on filters and oth-

er environmental prevention equipments. At the same time,

we have signed several environmental MOUs with numerous

organizations, and participate in Green Company meetings,

forums on environmental policies, and water improvement

initiatives for Mihocheon Stream. We have also signed an

agreement called Park Friends with the Korea National Park

Service.

Health, Safety & Environmental System

• Renewal of green company certification (Oct. 2017) and ISO14001 certification

• One of the excellent performers at the 2017 Korea Green Company Awards (June 2017)

• Registration and verification of the environmental information disclosure verification system (June 2017)

Environmental Management Activities

• Participation in water quality improvement programs at Mihocheon Stream (Mar. 2017)

• Park Friends Agreement signed with Gyeoryong National Park (May 2017)

• Coal briquette delivery service (Feb. & Sep. 2017)

Eco-friendly Culture Activities

• Maintenance of the KOSHA & OHSAS18001 certifications through quarterly Occupational Health & Safety Commission approval

• Regular health & safety education sessions: 340 employees/month

• Safety check-ups before the work process and elimination of risk factors

• Heightened in-house education on supervisors

Accident-Free Certification

Labor and management are both committed to protecting and promoting a healthy and safe workplace for the prevention of occupational accidents.

Health, Safety & Environment — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Health, Safety & Environment

Accident-free worksite (Ochang Plant)


13 times the industry’s target accident-free duration

18 consecutive years

13 times, Accident-free

hours

people

Production of high-quality pharmaceutical products from advanced HSE systems

YUHAN ANNUAL REPORT 2017-2018 — Message From The CEO84 77

PROGRESS &INTEGRITY

FinancialStatement

3Yuhan Corporation recorded KRW

1,462.2 billion in sales and KRW

88.7 billion in operating profit

for 2017, further consolidating

its market leadership. As Korea’s

leading pharmaceutical company,

Yuhan Corporation will continue to

be a reliable partner that lives up

to its reputation and contributes to

corporate and shareholder value.


To the Board of Directors and Shareholders of Yuhan Corporation

We have audited the accompanying consolidated financial

statements of Yuhan Corporation and its subsidiaries (collec-

tively “the Group”), which comprise the consolidated state-

ments of financial position as of December 31, 2017 and 2016,

and the consolidated statements of comprehensive income,

changes in equity and cash flows for the years then ended, and

notes, comprising a summary of significant accounting policies

and other explanatory information.

Management’s Responsibility for the

Consolidated Statements of Financial Position

Management is responsible for the preparation and fair pre-

sentation of these financial statements in accordance with the

International Financial Reporting Standards as adopted by the

Republic of Korea (Korean IFRS) and for such internal control

as management determines is necessary to enable the prepa-

ration of financial statements that are free from material mis-

statement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial

statements based on our audits. We conducted our audits in

accordance with the Korean Standards on Auditing. Those

standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit ev-

idence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of materi-

al misstatement of the financial statements, whether due to

fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation

and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circum-

stances, but not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of

the financial statements.

We believe that the audit evidence we have obtained is suffi-

cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present

fairly, in all material respects, the financial position of Yuhan

Corporation and its subsidiaries as of December 31, 2017 and

2016, and their financial performance and cash flows for the

years then ended in accordance with the Korean IFRS.

March 08, 2018

Seoul, South Korea

Samil PricewaterhouseCoopers

English translation of a report originally issued in Korean

Independent Auditors’ Report — YUHAN ANNUAL REPORT 2017-2018

7978

Consolidated Statements ofFinancial Position

Yuhan Corporation and Subsidiaries (in KRW) 20162017

Assets

Ⅰ. Current assets

1. Cash and cash equivalents

2. Short-term financial instruments

3. Short-term financial assets

4. Trade receivables

5. Accounts receivable

6. Short-term loans

7. Inventories

8. Advanced payments

9. Prepaid expenses

10. Deposit

Ⅱ. Non-current assets

1. Long-term financial instruments

2. Long-term financial assets

3. Investments in associates and joint ventures

4. Property, plant and equipment

5. Investments in properties

6. Intangible assets

7. Long-term deposit

8. Deferred income tax assets

Total assets

244,854,557,115

10,793,948,161

230,785,395,208

235,586,779,277

13,035,911,977

-

310,649,129,347

1,190,679,544

1,198,278,315

245,723,995

157,000,000

146,524,559,462

376,673,767,642

333,946,657,459

111,527,423,399

15,871,922,111

11,360,224,000

1,539,084,004

1,048,340,402,939

997,600,638,077

2,045,941,041,016

256,607,486,669

35,948,090,339

208,520,251,626

283,714,873,637

9,585,089,594

260,000,000

271,183,981,240

2,688,094,225

737,178,422

267,860,505

84,500,000

145,296,399,333

372,586,571,302

355,412,428,909

111,070,674,945

25,736,900,792

12,708,639,113

2,264,403,164

1,069,512,906,257

1,025,160,517,558

2,094,673,423,815

Ⅰ. Current liabilities

1. Trade payables

2. Non-trade payables

3. Accrued expenses

4. Income taxes payable

5. Withholdings

6. Deposits received

7. Short-term borrowings

8. Advances from customers

9. Current portion of long-term liabilities

Ⅱ. Non-current liabilities

1. Net defined benefit liabilities

2. Provision for returns

3. Other provisions

4. Deferred income tax liabilities

5. Long-term deposits received

6. Long-term borrowings

Total liabilities

Equity

Ⅰ. Capital stock

1. Capital stock-common

2. Preferred capital stock

Ⅱ. Other paid-in capital

Ⅲ. Retained earnings

Ⅳ. Other components of equity

Ⅴ. Non-controlling interests

Total equity

Total liabilities and equity

97,841,500,338

37,172,405,479

2,754,162,441

21,755,548,432

23,526,931,546

11,749,186,000

3,186,140,739

63,027,802,309

15,300,000,000

45,498,941,184

6,690,794,941

9,947,133,222

33,674,492,817

884,500,000

115,338,888,885

58,329,480,000

1,180,940,000

276,313,677,284

212,034,751,049

488,348,428,333

59,510,420,000

(35,129,987,441)

1,493,282,491,002

82,315,350,255

6,346,721,666

1,606,324,995,482

2,094,673,423,815

142,132,951,200

29,976,085,562

1,886,521,897

22,693,447,143

22,116,097,957

7,824,186,000

51,100,000,000

41,454,203,325

5,250,000,000

31,635,804,883

6,589,571,551

8,854,515,596

32,740,800,861

4,884,500,000

140,250,000,000

55,762,730,000

1,180,940,000

324,433,493,084

224,955,192,891

549,388,685,975

56,943,670,000

(49,170,207,064)

1,411,161,804,670

77,617,087,435

-

1,496,552,355,041

2,045,941,041,016

Liabilities


December 31, 2017 and 2016

Consolidated Statements of Financial Position — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Consolidated Statements of Financial Position

8180

Years Ended December 31, 2017 and 2016Years Ended December 31, 2017 and 2016 Consolidated Statements ofChanges in Equity

Consolidated Statements ofComprehensive Income


Ⅰ. Sales

Ⅱ. Cost of sales

Ⅲ. Gross profit

Ⅳ. Selling and administrative expenses

Ⅴ. R&D expenses

Ⅵ. Operating profit

Ⅶ. Other revenues

Ⅷ. Other expenses

Ⅸ. Finance income

Ⅹ. Finance expenses

ⅩⅠ. Equity gains (losses) on investments

ⅩⅡ. Profit before income tax

ⅩⅢ. Income tax expense

ⅩⅣ. Profit for the year

1. Controlling interest

2. Non-controlling interest

ⅩⅤ. Other comprehensive income

Items that will not be reclassified to profit or loss

1. Remeasurements of net defined benefit liabilities

2. Changes in retained earnings from the equity method

Items that will be reclassified to profit or loss

1. Gains and losses on valuation of change in value of available-for-sale

ⅩⅥ. Total comprehensive income

1. Controlling interest

2. Non-controlling interest

ⅩⅦ. Earnings per share

1. Basic earnings per share of common stock

2. Diluted earnings per share of common stock

3. Basic earnings per share of preferred stock

161,248,743,738

-

(1,558,065,400)

(1,561,361,289)

(3,812,307,103)

154,317,009,946

-

1,320,797,335,286

931,355,854,828

389,441,480,458

238,981,918,807

52,666,534,365

97,793,027,286

45,284,261,182

12,535,416,248

19,071,417,647

9,866,375,283

65,145,487,533

204,892,402,117

43,643,658,379

161,248,743,738

(6,931,733,792)

(3,119,426,689)

(3,812,307,103)

154,317,009,946

15,704

15,704

15,763

109,034,185,953

602,472,805

(14,399,911,340)

5,716,674,014

4,698,262,820

105,058,186,562

593,497,690

1,462,248,030,140

1,037,623,911,211

424,624,118,929

264,479,687,896

71,434,810,887

88,709,620,146

29,986,949,212

16,819,715,253

10,236,643,335

13,655,727,842

46,462,722,213

144,920,491,811

35,283,833,053

109,636,658,758

(3,984,974,506)

(8,683,237,326)

4,698,262,820

105,651,684,252

10,176

10,176

10,136

Other paid-in capital

Capital stock Premium oncommon

stock

Treasurystock

Other capitalsurplus

Retainedearnings

Othercomponents

of equity

Controllinginterest

Noncon-trollinginterest

(in KRW)

Balance at January 1, 2016

Net income

Other comprehensive income:

Gains and losses on valuation of

change in value of available-for-sale

Remeasurements of net defined benefit liabilities

Changes in retained earnings from the equity method

Comprehensive income

Transactions with owners:

Dividends

Share repurchases

Balance at December 31, 2016


Net income


Gains and losses on valuation of change in value of

available-for-sale


Changes in other comprehensive income/loss of

investment stocks accounted in equity method



Dividends

Share repurchases

Sale of treasury stock

Bonus issue

Change in consolidated entity


56,943,670,000

-

-

-

-

-

-

56,943,670,000

56,943,670,000

-

-

-

-

-

-

-

2,566,750,000

-

59,510,420,000

95,219,976,623

-

-

-

-

-

-

95,219,976,623

95,219,976,623

-

-

-

-

-

-

-

(2,607,458,800)

(1,411,146,037)

91,201,371,786

(163,762,861,366)

-

-

-

-

-

(1,159,057,900)

(164,921,919,266)

(164,921,919,266)

-

-

-

-

-

(1,056,371,400)

13,180,097,101

-

-

(152,798,193,565)

20,531,735,579

-

-

-

-

-

-

20,531,735,579

20,531,735,579

-

-

-

-

-

-

5,388,184,559

546,914,200

26,466,834,338

1,273,577,997,021

161,248,743,738

-

(1,558,065,400)

(1,561,361,289)

158,129,317,049

(20,545,509,400)

1,411,161,804,670

1,411,161,804,670

109,034,185,953

-

(14,390,936,225)

5,716,674,014

100,359,923,742

(20,545,509,400)

-

-

-

2,306,271,990

1,493,282,491,002

81,429,394,538

-

(3,812,307,103)

-

-

(3,812,307,103)

-

-

77,617,087,435

77,617,087,435

4,698,262,820

-

-

4,698,262,820

-

-

-

-

-

82,315,350,255

1,363,939,912,395

161,248,743,738

(3,812,307,103)

(1,558,065,400)

(1,561,361,289)

154,317,009,946

(20,545,509,400)

(1,159,057,900)

1,496,552,355,041

1,496,552,355,041

109,034,185,953

4,698,262,820

(14,390,936,225)

5,716,674,014

105,058,186,562

(20,545,509,400)

(1,056,371,400)

18,568,281,660

(40,708,800)

1,442,040,153

1,599,978,273,816

-

-

-

-

-

-

-

-

-

-

602,472,805

-

(8,975,115)

-

593,497,690

-

-

-

-

5,753,223,976

6,346,721,666

Total

1,363,939,912,395

161,248,743,738

(3,812,307,103)

(1,558,065,400)

(1,561,361,289)

154,317,009,946

(20,545,509,400)

(1,159,057,900)

1,496,552,355,041

1,496,552,355,041

109,636,658,758

4,698,262,820

(14,399,911,340)

5,716,674,014

105,651,684,252

(20,545,509,400)

(1,056,371,400)

18,568,281,660

(40,708,800)

7,195,264,129

1,606,324,995,482

Yuhan Corporation and Subsidiaries

Consolidated Statements of Changes in Equity — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Consolidated Statements of Comprehensive Income

8382



Ⅰ. Cash flows from operating activities

1. Net income

2. Adjustments

Severance and retirement benefits

Depreciation

Depreciation expenses on invested property

Amortization expenses on intangible assets

Bad debt expenses

Interest revenue

Interest expense

Dividend income

Equity method gains

Losses on valuation of inventories

Gains on disposition of short-term investment

Losses on disposition of short-term investment

Gains on valuation of short-term investment

Gains on valuation of long-term investment

Losses on valuation of long-term investment

Gain on disposition of long-term investment assets

Impairment losses on long-term investment

Reversal of impairment losses on long-term investment

Gains on disposition of investment in associates

Gains on disposition of tangible assets

Losses on disposition of tangible assets

Gain on disposition of intangible assets

Loss on disposition of intangible assets

Impairment losses on intangible assets

Foreign currency translation gains

Foreign currency translation losses

Other foreign currency translation gains

Other foreign currency translation losses

161,248,743,738

5,471,768,779

18,449,654,500

40,608,769,799

885,877,214

1,425,415,588

-

(9,567,552,995)

5,330,001,404

(1,215,350)

(65,145,487,533)

(25,185,500)

(89,454,696)

161,943,347

(519,340,476)

(1,576,431,905)

2,032,531

-

9,505,114

(2,692,985,497)

(23,765,739,579)

(106,518,734)

334,826,595

(461,650,002)

7,727,273

20,500,000

(2,765,620,017)

14,946,583

(1,241,904,453)

903,057,194

74,144,086,537

109,636,658,758

46,032,289,940

19,248,442,952

49,164,020,533

860,972,984

2,170,478,824

(2,897,926,667)

(9,331,331,517)

4,615,616,080

(1,184,600)

(46,462,722,213)

741,948,507

-

515,013,227

(956,988,635)

(6,588,000,000)

-

(11,049,162,277)

4,922,513,714

-

(1,624,601,718)

(100,940,019)

6,643,725

-

-

5,500,000

(183,391,203)

4,048,777,234

(100,888,932)

1,064,302,723

126,125,107,517


Income taxes

Provision for others

Others

3. Total changes in assets/liabilities

Increase in trade receivables

Decrease in other receivables

Decrease (increase) in inventory

Decrease (increase) in other current assets

Increase in other non-current assets

Decrease in trade payable

Increase in trade payable

Increase in other current liabilities

Increase in other non-current liabilities

Payment of severance benefits

Increase in plan assets

Increase in provision for returns

Decrease in provision for others

4. Interest receivable

5. Interest paid

6. Dividend receivables

7. Payment of corporate taxes

43,643,658,379

726,314,865

906,625,130

(108,786,004,720)

(21,356,405,697)

7,997,765,458

(68,275,044,178)

(1,201,190,079)

(2,639,070,000)

(10,192,879,815)

422,831,744

4,082,942,148

241,926,319

(4,368,045,627)

(16,974,235,398)

3,475,400,405

-

9,565,683,455

(5,368,919,264)

46,962,838,485

(34,950,023,936)

35,283,833,053

2,028,735,203

652,628,962

(45,434,184,153)

(55,589,285,661)

4,443,996,331

40,727,513,394

18,947,223

(872,778,168)

(45,682,616,823)

3,071,020,600

34,964,453,203

386,000,000

(5,615,553,237)

(20,432,108,845)

82,345,407

(936,117,577)

9,431,471,883

(5,444,798,140)

49,462,042,310

(37,558,373,081)

Years Ended December 31, 2017 and 2016

Consolidated Statements of Cash Flows — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Consolidated Statements of Cash Flows

8584



Ⅱ. Cash flows from investing activities

Increase in short-term financial instruments

Decrease in short-term financial instruments

Purchases of short-term financial assets

Proceeds from disposal of short-term financial assets

Increase in short-term loans

Decrease in short-term loans

Purchases of long-term financial assets

Proceeds from disposal of long-term financial assets

Increase in long-term financial instruments

Decrease in long-term financial instruments

Purchase of investment stocks accounted in equity method

Disposal of investment stocks accounted in equity method

Purchases of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Purchases of intangible assets

Proceeds from disposal of intangible assets

Increase in cash flows from change to the scope of consolidation

Ⅲ. Cash flows from financing activities

Share repurchases


Provision of dividends

Dividends paid to non-controlling interests

Bonus issue expenses

Increase in short-term borrowings


Increase in long-term current liabilities

Decrease in long-term current liabilities

Increase in long-term borrowings

Decrease in long-term borrowings

Ⅳ. Net increase (decrease) in cash and cash equivalents

Ⅴ. Cash and cash equivalents at beginning of year

Ⅵ. Changes in cash equivalents due to foreign

currency translation

Ⅶ. Cash and cash equivalents at the end of year

(2,015,000,000)

2,108,000,000

(189,148,126,255)

217,653,491,664

-

-

(23,580,521,159)

-

(81,000,000)

-

(14,601,760,470)

16,213,326,208

(80,076,251,469)

119,589,882

(4,548,899,829)

816,227,729

(1,159,057,900)

-

(20,545,509,400)

-

-

3,000,000,000

(15,000,000,000)

2,750,000,000

-

54,250,000,000

-

(77,140,923,699)

23,295,432,700

20,298,595,538

221,805,288,143

2,750,673,434

244,854,557,115

(28,746,330,960)

2,963,612,038

(212,016,182,969)

285,176,759,757

(85,000,000)

130,000,000

(44,250,784,122)

14,005,237,550

(111,812,800)

245,213,135

(5,025,268,000)

3,742,594,153

(56,772,073,882)

141,964,219

(3,138,458,472)

-

1,499,363,457

(1,056,371,400)

20,288,520,000

(20,545,509,400)

(201,130,000)

(40,708,800)

95,626,051

(51,292,109,691)

-

(5,421,006,391)

-

(10,000,000,000)

(42,241,166,896)

(68,172,689,631)

15,711,250,990

244,854,557,115

(3,958,321,436)

256,607,486,669

To the Board of Directors and Shareholders of Yuhan Corporation

We have audited the accompanying financial statements of Yu-

han Corporation, which comprise the statements of financial

position as of December 31, 2017 and 2016, and the state-

ments of comprehensive income, changes in equity and cash

flows for the years then ended, and notes, comprising a sum-

mary of significant accounting policies and other explanatory

information.

Management’s Responsibility for the Financial

Statements

Management is responsible for the preparation and fair pre-

sentation of these financial statements in accordance with the

International Financial Reporting Standards as adopted by the

Republic of Korea (Korean IFRS) and for such internal control

as management determines is necessary to enable the prepa-

ration of financial statements that are free from material mis-

statement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial

statements based on our audits. We conducted our audits in

accordance with the Korean Standards on Auditing. Those

standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit ev-

idence about the amounts and disclosures in the financial

statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of materi-

al misstatement of the financial statements, whether due to

fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation

and fair presentation of the financial statements in order to

design audit procedures that are appropriate in the circum-

stances, but not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal control. An audit also

includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of

the financial statements.

We believe that the audit evidence we have obtained is suffi-

cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present

fairly, in all material respects, the financial position of Yuhan

Corporation as of December 31, 2017 and 2016, and their fi-

nancial performance and cash flows for the years then ended

in accordance with the Korean IFRS.

March 08, 2018

Samil PricewaterhouseCoopers

Seoul, South Korea

Independent Auditors’ ReportEnglish translation of a report originally issued in KoreanYears Ended December 31, 2017 and 2016

Independent Auditors’ Report — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Consolidated Statements of Cash Flows

8786

December 31, 2017 and 2016

Ⅰ. Current liabilities

1. Trade payables

2. Accounts payable

3. Accrued expenses

4. Income taxes payable

5. Deposits received

6. Guarantee deposit received

7. Advances from customers

Ⅱ. Non-current liabilities

1. Net defined benefit liabilities

2. Provision for returns

3. Other provisions

4. Deferred income tax liabilities

5. Long-term deposits received

Total liabilities

Equity

Ⅰ. Capital stock

1. Capital stock-common

2. Preferred capital stock

Ⅱ. Other paid-in capital

Ⅲ. Retained earnings

Ⅳ. Other components of equity

Total equity

Total liabilities and equity

120,698,587,437

28,218,903,205

36,539,702

20,368,484,863

21,433,708,387

8,382,186,000

41,448,450,867

28,193,382,283

6,589,571,551

8,048,972,800

18,972,920,414

4,884,500,000

55,762,730,000

1,180,940,000

240,586,860,461

66,689,347,048

307,276,207,509

56,943,670,000

(49,170,207,064)

1,296,286,027,173

86,758,567,435

1,390,818,057,544

1,698,094,265,053

Separate Statements of Financial Position

Liabilities

Yuhan Corporation (in KRW) 20162017 Yuhan Corporation (in KRW) 20162017

Assets

Ⅰ. Current assets

1. Cash and cash equivalents

2. Short-term financial instruments

3. Short-term financial assets

4. Trade receivables

5. Accounts receivable

6. Short-term loans

7. Inventories

8. Advanced payments

9. Prepaid expenses

Ⅱ. Non-current assets

1. Long-term financial instruments

2. Long-term financial assets

3. Investment in subsidiary and affiliated companies and joint business investment

4. Property, plant and equipment

5. Investments in properties

6. Intangible assets

7. Long-term deposit

Total assets

213,724,669,577

8,793,948,161

230,785,395,208

230,988,452,422

6,647,511,975

40,000,000,000

109,663,661,588

27,300,775,819

866,361,432

18,500,000

146,524,559,462

376,074,164,920

179,268,029,086

101,480,462,146

14,936,099,257

11,021,674,000

868,770,776,182

829,323,488,871

1,698,094,265,053

218,400,839,071

27,860,279,379

208,520,251,626

279,580,293,878

7,910,965,630

35,000,000,000

113,485,694,259

42,643,821,300

472,381,378

18,500,000

145,296,399,333

384,888,126,920

214,451,626,746

101,103,647,465

18,457,955,015

12,364,632,168

933,874,526,521

876,580,887,647

1,810,455,414,168

91,566,010,806

35,375,568,296

32,443,583

21,235,864,178

22,606,752,614

11,749,186,000

62,942,184,504

41,673,920,721

6,671,916,958

9,063,905,549

18,285,901,020

1,260,500,000

58,329,480,000

1,180,940,000

245,508,009,981

76,956,144,248

322,464,154,229

59,510,420,000

(34,265,755,604)

1,371,289,765,288

91,456,830,255

1,487,991,259,939

1,810,455,414,168

Separate Statements of Financial Position — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Separate Statements of Financial Position

8988

Years Ended December 31, 2017 and 2016 Years Ended December 31, 2017 and 2016Separate Statements ofComprehensive Income

Separate Statements ofChanges in Equity

Yuhan Corporation (in KRW) 20162017

Ⅰ. Sales

Ⅱ. Cost of sales

Ⅲ. Gross profit

Ⅳ. Selling and administrative expenses

Ⅴ. R&D expenditure

Ⅵ. Operating profit

Ⅷ. Other revenues

Ⅷ. Other expenses

Ⅸ. Finance income

Ⅹ. Finance expenses

ⅩⅠ. Profit before income tax

ⅩII. Income tax expense

ⅩIII. Profit for the year

ⅩⅣ. Other comprehensive income

Items that will not be reclassified to profit or loss


Items that will be reclassified to profit or loss

1. Gains and losses on valuation of change in value of available-for-sale

ⅩⅤ. Total comprehensive income

ⅩⅥ.Earnings per share

1. Basic earnings per share of common stock

2. Diluted earnings per share of common stock

3. Basic earnings per share of preferred stock

(974,111,629)

5,329,172,897

1,312,018,358,558

955,319,528,767

356,698,829,791

231,770,797,017

52,666,534,365

72,261,498,409

31,768,146,384

9,962,579,431

67,133,696,434

4,536,373,879

156,664,387,917

34,263,838,541

122,400,549,376

4,355,061,268

(974,111,629)

5,329,172,897

126,755,610,644

11,921

11,921

11,977

(15,183,029,762)

4,698,262,820

1,451,988,375,808

1,048,516,624,545

403,471,751,263

252,335,554,823

70,778,446,109

80,357,750,331

28,192,274,355

16,706,933,597

61,695,295,204

7,810,188,252

145,728,198,041

34,995,920,764

110,732,277,277

(10,484,766,942)

(15,183,029,762)

4,698,262,820

100,247,510,335

10,277

10,277

10,237

(in KRW)


Net income


Gains and losses on valuation of change in

value of available-for-sale




Dividends

Share repurchases



Net income


Gains and losses on valuation of change in

value of available-for-sale




Dividends

Share repurchases


Bonus issue


Other paid-in capital

Capitalstock

56,943,670,000

-

-

-

-

-

-

56,943,670,000

56,943,670,000

-

-

-

-

-

-

-

2,566,750,000

59,510,420,000

Additional paid-incapital

95,219,976,623

-

-

-

-

-

-

95,219,976,623

95,219,976,623

-

-

-

-

-

-

-

(2,607,458,800)

92,612,517,823

Treasurystock

(163,762,861,366)

-

-

-

-

-

(1,159,057,900)

(164,921,919,266)

(164,921,919,266)

-

-

-

-

-

(1,056,371,400)

13,180,097,101

-

(152,798,193,565)

Other capitalsurplus

20,531,735,579

-

-

-

-

-

-

20,531,735,579

20,531,735,579

-

-

-

-

-

-

5,388,184,559

-

25,919,920,138

Retainedearnings

1,195,405,098,826

122,400,549,376

-

(974,111,629)

121,426,437,747

(20,545,509,400)

-

1,296,286,027,173

1,296,286,027,173

110,732,277,277

-

(15,183,029,762)

95,549,247,515

(20,545,509,400)

-

-

-

1,371,289,765,288

Noncontrollinginterest

81,429,394,538

-

5,329,172,897

-

5,329,172,897

-

-

86,758,567,435

86,758,567,435

-

4,698,262,820

-

4,698,262,820

-

-

-

-

91,456,830,255

Total

1,285,767,014,200

122,400,549,376

5,329,172,897

(974,111,629)

126,755,610,644

(20,545,509,400)

(1,159,057,900)

1,390,818,057,544

1,390,818,057,544

110,732,277,277

4,698,262,820

(15,183,029,762)

100,247,510,335

(20,545,509,400)

(1,056,371,400)

18,568,281,660

(40,708,800)

1,487,991,259,939

Yuhan Corporation

Separate Statements of Changes in Equity — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Separate Statements of Comprehensive Income

9190

Separate Statements of Cash Flows


Ⅰ. Cash flows from operating activities

1. Net income

2. Adjustments

Severance and retirement benefits

Depreciation

Depreciation expenses on invested property

Amortization

Recovery of bad debt expenses

Interest revenue

Dividend income

Reversal of losses on valuation of inventories

Gains on disposition of short-term investment

Losses on disposition of short-term investment

Gains on valuation of short-term investment

Gain on disposition of long-term investment assets

Gains on valuation of long-term investment

Losses on valuation of long-term investment

Impairment losses on long-term investment

Reversal of impairment losses on long-term investment

Gains on disposition of tangible assets

Losses on disposition of tangible assets

Gain on disposal of investments in associates

Gains on disposition of intangible assets

Losses on disposition of intangible assets

Impairment losses on intangible assets

Foreign currency translation gains

Foreign currency translation losses

122,400,549,376

(7,390,495,208)

15,965,562,828

18,686,478,309

805,943,441

1,226,586,785

-

(10,668,208,647)

(46,962,838,485)

1,248,465

(89,454,696)

161,943,347

(519,340,476)

-

(1,576,431,905)

2,032,531

9,505,114

(2,692,985,497)

(67,488,291)

206,000

(12,373,326,208)

(461,650,002)

7,727,273

20,500,000

(2,765,620,017)

14,946,583

94,389,537,203

110,732,277,277

5,914,224,331

16,254,477,780

23,296,051,552

781,039,211

1,624,322,896

(2,872,725,058)

(10,778,477,545)

(49,587,977,310)

(270,834,595)

-

515,013,227

(956,988,635)

(11,024,641,070)

(6,588,000,000)

-

4,922,513,714

-

(56,345,819)

6,643,725

(528,593,753)

(10,318)

-

5,500,000

-

2,856,264,248

48,520,504,211


Other foreign currency translation gains

Other foreign currency translation losses

Income tax expenses

Provision for others

Other

3. Total changes in assets/liabilities

Increase in account receivable

Decrease (increase) in other bonds

Decrease (increase) in inventory

Increase in other current assets

Increase in other non-current assets

Increase (increase) in trade payable

Increase in trade payable

Increase in other current liabilities

Increase in other non-current liabilities

Increase in provision for returns

Decrease in provision for others

Severance benefits paid

Increase in plan assets

4. Interest receivables

5. Dividend receivables

6. Corporate taxes paid

(1,192,191,379)

45,564,646

34,263,838,541

493,361,618

273,594,914

(46,428,739,968)

(21,073,541,496)

5,463,063,013

12,259,745,451

(27,022,196,598)

(2,700,070,000)

(3,630,038,417)

311,721,845

3,919,356,808

286,500,000

3,475,400,405

-

(3,758,810,929)

(13,959,870,050)

10,355,064,657

46,962,838,485

(31,509,680,139)

(100,888,932)

1,064,302,723

34,995,920,764

1,893,711,009

463,946,517

(93,723,559,260)

(46,299,481,789)

(278,210,984)

(3,551,198,076)

(15,079,015,148)

(1,342,958,168)

(29,031,848,474)

3,126,454,338

22,023,777,864

386,000,000

82,345,407

(878,778,260)

(3,420,270,390)

(19,460,375,580)

9,198,003,806

49,587,977,310

(33,188,419,253)


Separate Statements of Cash Flows — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Separate Statements of Cash Flows

9392

Years Ended December 31, 2017 and 2016Separate Statements of Cash Flows


Ⅱ. Cash flows from investing activities

Increase in short-term financial instruments

Purchases of short-term financial assets

Proceeds from disposal of short-term financial assets

Purchases of long-term financial assets

Proceeds from disposal of long-term financial assets

Increase in short-term loans


Acquisition of investments in subsidiaries

Purchases of investments in associates

Proceeds from disposal of investments in associates

Purchases of property, plant and equipment

Proceeds from disposal of property, plant and equipment

Purchases of intangible assets

Proceeds from disposal of intangible assets

Ⅲ. Cash flows from financing activities

Share repurchases


Provision of dividends

Stock issue costs

Ⅳ. Net increase (decrease) in cash and cash equivalents

Ⅴ. Cash and cash equivalents at beginning of year

Ⅵ. Changes in cash equivalents due to foreign

currency translation

Ⅶ. Cash and cash equivalents at the end of year

-

(189,148,126,255)

217,653,491,664

(23,580,521,159)

-

(40,000,000,000)

-

-

(14,601,760,470)

16,213,326,208

(31,834,338,736)

67,604,291

(4,422,373,029)

816,227,729

(1,159,057,900)

-

(20,545,509,400)

-

(68,836,469,757)

(21,704,567,300)

3,848,500,146

207,125,495,997

2,750,673,434

213,724,669,577

(20,288,520,000)

(212,016,182,969)

285,176,759,757

(44,250,784,122)

14,005,237,550

-

5,000,000,000

(7,000,000,000)

(5,025,268,000)

3,742,594,153

(54,881,350,156)

79,519,909

(4,217,097,152)

41,090,161

(1,056,371,400)

20,288,520,000

(20,545,509,400)

(40,708,800)

(39,634,000,869)

(1,354,069,600)

7,532,433,742

213,724,669,577

(2,856,264,248)

218,400,839,071


Confirmed disposal date: March 16, 2018

Confirmed disposal date: March 24, 2017

Statements ofEarned Surplus


Ⅰ. Unappropriated earned surplus

1. Unappropriated retained earnings carried over

from the previous year

2. Net income


Ⅱ.Appropriated retained earnings

1. Earned surplus reserve

2. Reserve fund for R&D and human development

3. Reserve for facilities improvement

4. Reserve for gains (losses) on equity method

5. Reserve for business extensions

6. Dividends

Cash dividends

Dividend per share (rate)/ Common stock:

2017 KRW 2,000 (40%)

2016 KRW 2,000 (40%)

Dividend per share (rate)/ Preferred stock:

2017 KRW 2,050 (41%)

2016 KRW 2,050 (41%)

Ⅲ.Retained earnings carried over to the subsequent

1,626,589,426

122,400,549,376

(974,111,629)

2,100,000,000

50,000,000,000

12,000,000,000

7,000,000,000

30,000,000,000

20,545,509,400

20,545,509,400

20,074,690,000

470,819,400

123,053,027,173

121,645,509,400

1,407,517,773

1,407,517,773

110,732,277,277

(15,183,029,762)

2,200,000,000

43,000,000,000

10,000,000,000

8,700,000,000

10,000,000,000

21,749,829,400

21,749,829,400

21,279,010,000

470,819,400

96,956,765,288

95,649,829,400

1,306,935,888

Separate Statements of Earned Surplus — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Separate Statements of Cash Flows

Best Brands — YUHAN ANNUAL REPORT 2017-2018 95YUHAN ANNUAL REPORT 2017-2018 — Best Brands94

Beecom-C Antiphramine Vitamin-C 1000mg

Megatrue Contac Gold Zyrtec

Rapicol Mag-B Elena

Bio-Oil Yuhanrox Arm & Hammer

Yuhan Dental Care

Wellness Happy Home Yuhan Gen

For the past 92 years, Yuhan Corporation has been building trust with customers. The image

of “Yuhan with Willow Tree Trademark, a symbol of trust” was created to visualize a brand of

honesty, credibility, and trust. We will extend our assistance to minimize customer complaints

and maximize satisfaction through quality customer services. This includes operating customer

support centers, publishing reports on claims, and educating our employees.

Best Brands

9796

Established as a joint venture with Kimberly-Clark in 1970,

Yuhan-Kimberly has been leading the domestic market in key

businesses that include infant, children, and female products,

household products, and skin care and senior care, while ex-

porting relevant goods to countries worldwide, based on world-

class quality.

- www.yuhan-kimberly.co.kr

Yuhan-Kimberly

Established as a joint venture with Clorox and renamed in 1978,

Yuhan-Clorox has mainly produced Yuhanrox Regular and Yu-

hanrox Fresh (household bleach), and Punclin (liquid plumber).

- www.yuhanclorox.co.kr

Yuhan-Clorox

Founded in 2017, AddPharma is a subsidiary specialized in IMD

R&D activities such as combinations and release controllers. The

company takes advantage of its IMD success know-how in its

continued R&D efforts for health products.

Addpharma

Established in 1988, Ucarlix is the first company in South Korea

to specialize in bathroom and hygiene management. Its prod-

ucts include Calmit Unit detergents for bathrooms, air freshen-

ers, foam soaps, hand sanitizers, and seat cleaners.

- www.ucarlix.com

Ucarlix

Established in 1983 as a joint venture with Belgium’s Janssen

Pharmaceutical, a subsidiary of Johnson & Johnson, Janssen Ko-

rea produces medicine for pain, central nervous system diseases,

as well as digestive, skin, and allergy troubles with stateof-the-

art GMP facilities.

- www.janssenkorea.com

Janssen Korea

Established in India as a joint venture in 1992, GBTL locally pro-

duces and supplies APIs for Rifampicin, a tuberculosis treatment.

GTBL

Established in 1980, Yuhan Chemical boasts the latest manu-

facturing facilities that meet the cGMP standards and a quality

guarantee system. A world-class APIs manufacturer, it exports

to pharmaceutical companies around the world.

- www.yuhanchem.co.kr

Yuhan Chemical

Established in 1982, Yuhan Medica engages in OTC medicines

businesses and supplementary health products.

- www.yuhanmedica.co.kr

Yuhan Medica

Affiliates

Yuhan Philia began as a beauty business unit under Yuhan Cor-

poration. In May 2017, it became independent as a subsidiary in

order to better respond to rapidly changing lifestyle and beauty

trends. It launched its brand at the beginning of 2018 and will

continue operations with enhanced efficiency and expertise in

the beauty business.

- www.yuhanphilia.com

Yuhan Philia

ImmuneOncia was established in September 2016 as a joint ven-

ture with the U.S.-based Sorrento Therapeutics for R&D collab-

orations on its antibody cancer immunotherapy. The company

strives to develop breakthrough immunotherapies for cancer

patients to make a better world for all.

- www.immuneoncia.com

ImmuneOncia

Warantec manufactures dental implants that the Korean gov-

ernment and a university hospital jointly developed in 1997.

With its priority placed on successful clinical trials, the company

manufactures and supplies Korea’s first onebody implants, an IU

System that has strengths in an innovative fixation methodology

and design, and an INEX System that prevents prosthetics com-

plications to clients at home and abroad.

- www.warantec.com

Warantec

Established in 2003, MG has specialized technologies in nu-

tritional rehydration solutions, developing the nation’s first

3-chamberbag products. It also produces MG Combi Solution,

Lipid LCT, and rehydration solutions.

- www.medi-green.co.kr

MG

Established based on a philosophy of honesty and creativity in

June 2000, C&C Co., Ltd. is an OEM and ODM company special-

izing in oral care products. Its competitive oral care experts and

employees have harnessed their industry-leading technologies

to manufacture high-quality oral hygiene products, ensuring

they achieve the highest possible customer satisfaction.

- www.cleancleaner.co.kr

C&C

Affiliates — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — Affiliates

9998

1984 Completed Yuhan R&D Institute

1985 Designated as the nation’s first Korea Good Manufacturing Practice (KGMP) certifiedmanufacturer

1987 Acquired full ownership of Yuhan Chemical

1988 · Yuhan R&D Institute certified as the nation’s

first Good Laboratory Practice (KGLP) certified testing organization

· Acquired full ownership of Yuhan-SmithKline and renamed as Yukyung Medica

1997· Completed new headquarters building· Completed Busan branch office building· Designated as the nation’s first Korea

Government Scholarship Program (KGSP)- approved pharmaceutical company

1998 · Designated as the Best Public

Corporation by the Korea Stock Exchange· Established Yuhan Medica by merging Yukyung

Medica with Yuhan Q-Food.· Exported the world’s first independently

developed immunosuppressant solid injection technology to Schering-Plough of the U.S.

1999 · Received Silver Tower Order of Industrial

Service Merit from the Korean government· Received Investor Relations (IR) Award from

Korea Economic Daily· Signed contract on domestic sales of

biological preparations for medical purposes with schering-plough

HistoryChallenge

Growth

Responsibility

Expansion

1926Founded Yuhan Corporation

1929 Relocated headquarters toYMCA, Jongno 2-ga, Seoul

1932 Built new headquarters building in Sinmunno 2-ga, Seodaemun-gu, Seoul

1933 Built Yuhan warehouse in Dalian, Manchuria, China

1936 Incorporated as a limited liability company (LLC), and built a plant in Sosa, Gyeonggi-do

1938 Opened Los Angeles branch office in the U.S.

1939 Opened Tianjin office and Shenyang branch office in China

1941 Established Yuhan Trade Agency

1942 Relocated headquarters to Sosa, Gyeonggi-do

1962 · Completed headquarters building in

Daebang-dong, Seoul· Listed on the Korea Stock Exchange

1968 Received Bronze Tower Order of Industrial Service Merit (as “Outstanding Taxpayer”) from the Korean government

1969 Completed Yeongdeungpo Plant in Seoul

1926-69

1970

· Established Yuhan-Kimberly · Received MoranMoran Medal, Order of Civil

Merit from the central government

1971 · Dr. Ilhan New passed away · Received posthumous Mugunghwa Medal,

Order of Civil Merit from the Korean government · Received presidential Commendation

1973 Succeeded in the synthesis of Rifampicin for the treatment of tuberculosis

1977 Established Yuhan-Clorox

1979 Completed Anyang Plant

1980

Established Yuhan Chemical, a joint venture with Korea Institute of Science and Technology (KIST)

1982 · Established global joint ventures,

Yuhan-SmithKline,· Yuhan-SP (Schering-Plough),

and Yuhan-Cyanamid· Completed Gyeongbuk branch office building

1983

· Received Silver Tower Order of Industrial Service Merit from the Korean government for outstanding labor management cooperation

· Established Janssen Korea, a joint venture with Janssen Pharmaceutical of Belgium

1970-89

2000-092000 · Signed pesticide sales agency contract

with Clorox Korea· Exported YH1885 antibacterial substance

technology to SmithKline Beecham· Received grand prize at the Korea HR

Management Awards from Korea Management Association

· Received distinguished service medal from Belgian Monarchy

2001 · Gunpo Plant certified as an

environmentally friendly company· Merged Yuhan Medica with Yuhan-C&T

2002 · Received the grand prize at the

National Productivity Awards from Korea Productivity Center

· Named Good Company for New Management- Employees Culture by the Ministry of Labor (Prime Minister Award)

· Gunpo Plant acquired ISO14001 certification

1990 Completed Chungnam branch office building

1991 · Dr. Ilhan New posthumously received the

inaugural True Entrepreneur Award from Chung-ang University

· Received distinguished service medal from Belgian Monarchy

1992 Established Gujarat Themis Biosyn (GTBL) in India

1994 · Received Quality Innovation Prize at the

National Productivity Awards from Korea Productivity Center

· Exported YH439 liver disease medication technology to Gleran Pharmaceutical of Japan

1995 · Established Yuhan-C&T· Received grand prize at the Korean

Corporate Culture Awards

1996 · Invested in Q-Food· Established Yuhan-Q Food· Completed second research building of

Yuhan R&D Institute in Yong-in, Gyeonggi-do

1990-99

History — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — History

101100

2012 · Received Innovative Pharmaceutical Enterprise

certification from the Ministry of Health and Welfare

· Signed Pradaxa sales and distribution contract with Boehringer Ingelheim Korea

· Made equity investment in Hanall Biopharma and Theragen Etex

2013· Ochang Plant achieved ten years of a

ccident-free operations· Signed contract for the manufacture and supply of

raw materials for hepatitis C treatments with Gilead Sciences

· Received USD 100 Million Export Tower award on Trade Day

· Received Gold Tower Order of Industrial Service Merit from the Korean government

· Ranked first in terms of sales in the pharmaceutical industry

2014· Made equity investment in MG· Sales reached KRW 1 trillion, a first in the

domestic pharmaceutical industry· Ranked first in terms of sales in the pharmaceutical

industry for the second consecutive year

2015· Completion of the new Yuhan Klorox

Hyangnam plant· Named one of the best performers in social value at

the 2015 Korea Management Association Consulting’s Korea Management Awards

· Equity investments in Bioneer, CosOn, Genexine, and Bio Sound Lab

2016· Selected as one of the Most Admired Companies in

Korea by Korea Management Association Consulting

· Named an industry “All-Star” for a 13th consecutive year by Korea Management Association

· Singled out as the No. 1 company in the pharmaceutical industry for the 13th straight year at the awards

· Ochang Plant surpassed the industry standard goal of having a zero-accident rate as set by the Korea Occupational Safety and Health Agency by a twelvefold factor

2003 · Received the Good Company Award from Citizens’

Coalition for Economic Justice· Signed exclusive sales contract with GSK· Named Top 50 Companies in corporate governance

index surveys by Corporate Governance Service· Ranked second in Good Image and Reputation

Companies by Citizens United for Better Society

2004· Ranked 42nd in the Corporate Responsibility Index

survey by Financial Times· Completed the new construction of Ochang Plant· Late Dr. Ilhan New named Entrepreneur of the

Month (Developed Ilhan New Road)· Yuhan Chemical completed FTC production building

2005 · Named Outstanding Taxpayer, and received

Minister of Finance and Economy Award· Revanex approved as the nation’s first innovative

drug· Completed construction of new facilities for

Yuhan R&D Institute in Giheung, Gyeonggi-do· Market capitalization exceeded KRW 1 trillion

(ranking 75th among domestic listed companies)· Received Company of the Year award in the

pharmaceuticals category by Korea CEO Association, the Ministry of Trade, Industry and Economy, and the Korea Chamber of Commerce and Industry

2006 · Completed Ochang Plant in Ochang,

Chungcheongbuk-do· Ochang Plant approved for KGMP, and Giheung

research institute ertified for KGLP· Revanex additionally approved for gastritis and

stomach ulcer· Received grand prize at New Medicine Development

Awards for Revanex Tab. from Korea Drug Research Association

2007 · Launched Revanex Tab.· Received Silver Tower Order of Industrial Service

Merit from the Korean government· Introduced compliance program (CP)· Received USD 50 Million Export Tower award from

the National Tax Service on Trade Day

2008· Declared vision to be a leading global health

company· Signed licensing agreement with Shenzhen

Zhijun Pharmaceutical of China for Revanex· Signed distribution agreement with

Andromaco of Chile· Received USD 70 Million Export Tower award

from the National Tax Service on Trade Day

2009· Ochang Plant achieved eight years of

accident-free operations· Received environmentally friendly

company certification· Signed exclusive domestic sales contract for

AIDS drug with Gilead Sciences of the U.S.· Corporate bond credit rating upgraded from

“A+” to “AA-”· Signed exclusive sales contract with Korea UCB

Innovation

2010· Ochang Plant received KOSHA 18001 and

OHAS 18001 safety and health management-system certificates

· Introduced extension of retirement age and reduced (peak) salary workshare

· Received the Prime Minister award at the Good Company for New Management Employees Culture Awards

· Signed sales and distribution contract with Boehringer Ingelheim Korea

2011· Ochang Plant achieved nine years of

accident-free operations· Signed exclusive contract for HBV disease

medicine with Gilead Sciences· Signed contract for joint development of

degenerative arthritis medication with Esoltek· Signed Trajenta sales and distribution contract

with Boehringer Ingelheim Korea and Lilly Korea

2010-Present

· Equity investments made in PharmAbcine, Sorrento Therapeutics, NeoImmuneTech, Xenosco and C&C Co., Ltd.

· Completion of Yuhan Chemical’s Hwaseong Plant

· Foundation of a joint venture, ImmuneOncia· Recipient of the Excellence Prize in the Image

Value category at Korea Management Association Consulting’s Management Awards

2017· Selected as one of the Most Admired

Companies in Korea by Korea Management Association (KMA) Consulting

- Named an industry all-star and pharmaceuticals top ranker for a 14th consecutive year by KMA

· Equity investments in Warantec (35.1% share), Bio Phoa and AddPharma (91.3% share)

· Established a beauty-specialized subsidiary called Yuhan Philia

· Signed an agreement for co-promotion on Sovaldi and Harvoni with Gilead Sciences

· Ochang Plant became the first pharmaceutical company to achieve 13 times the industry’s 1.2 million-hour accident-free goal.

· Presidential prize (grand prize) at the Minis-try of Trade, Industry, and Energy’s Korea Productivity Awards

· Entered into a Joint Venture Agreement with Qingdao Severance Hospital

· Recipient of the Excellence Prize in the Image Value category at KMA Consulting’s 2017 Korea Management Awards

· Recipient of the USD 200 Million Export Tower at the Ministry of Trade, Industry and Energy’s 54th Trade Day ceremony

History — YUHAN ANNUAL REPORT 2017-2018YUHAN ANNUAL REPORT 2017-2018 — History

Yuhan Corporation, with a history of 92 years, is taking a

leap forward to become a leading global pharmaceutical

brand. We will continue to evolve into a company that opens

the world market with breakthrough drugs and the export

of medicine while developing the founding philosophy of

Dr. Ilhan New to “Improve public health, contribute to the

national economy, and fulfill social responsibility”.

Yuhan Corporation74 Noryangjin-ro (Daebang-dong), Dongjak-gu,Seoul, South KoreaT. +82-2-828-0181

Ochang Plant219 Yeongudanji-ro, Ochang-eup, Cheongwon-gun,Chungcheongbuk-do, South KoreaT. +82-43-240-1000

Yuhan R&D Institute25 Tapsil-ro 35beon-gil (Gongse-dong), Giheung-gu,Yongin, Gyeonggi-do, South KoreaT. +82-31-899-4000

Contact InformationIf you have any questions about this annual report, please email: [email protected].

Homepagewww.yuhan.co.kr

©Yuhan Corporation, 2018

Yuhan Corporation has all copyrights to the materials of

this book, including text and photographs.

Therefore, any reproduction, duplication, distribution

or display of this material in any form or by any means

without the company’s prior approval, is prohibited.

Planning / Design IM creative Tel: +82-2-303-4266

This report was printed with soy ink on environmentally-friendly, FSCTM-certi-fied paper. The Forest Stewardship Council (FSC) mark is awarded to paper and pulp products that meet the strict standards set to ensure forests are managed responsibly and remain a truly renewable resource. As opposed to traditional pe-troleum-based ink, soy-based ink is more environmentally- friendly and has low levels of VOCs (Volatile Organic Compounds), which helps to reduce air pollution by minimizing toxic emissions.

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